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The Value of New Product Introduction and the Supply Chain

Date posted: February 6, 2015

It seems like every time I’m in my local cell phone store, the walls are covered with different phones than were there my last visit a few months before. The pace of new product innovation (NPI) is astonishing, and no doubt in part reflects what has rapidly become a “culture of the new.” What once was the domain of the fashion industry is now the concern of every industry. But for companies, what is the real value in today’s faster new product development?

A survey of chief supply chain officers by SCM World gauged how much value a high-performing supply chain could generate in terms of new product introduction. Four sectors were surveyed: hi-tech, consumer goods/retail, industrial, and health care/pharmaceutical. The results were interesting:

  • Almost three-quarters of respondents said that accelerated NPI delivered high or very high value, but compared to other sectors, the industrial group was the least likely to report this:
    • Hi-tech: 83 percent
    • Consumer goods/retail: 80 percent
    • Health care/pharmaceutical: 75 percent
    • Industrial: 59 percent
  • Not surprisingly, only 45 percent of the industrial group thought that skills related to new product development and launch were essential for supply chain talent. The average of all groups was 53 percent, with a high of 66 percent in the hi-tech sector. What was surprising was that the industrial group saw NPI value in top-line results (i.e., growth and revenue increase) at nearly the same high level as their hi-tech counterparts.

The nature of value generated by NPI was assessed across the groups based on four types of value: top-line results, bottom-line results (i.e., cost savings), compliance with regulations and strategy, and “soft value,” such as PR and better supplier relations. Here’s how the sectors saw value generated:

PERCEIVED VALUE OF PRODUCT INNOVATION Hi-Tech Consumer Goods & Retail Industrial Health Care/Pharmaceutical
Top-line results 47 percent 40 percent 46 percent 22 percent
Bottom-line results 36 percent 31 percent 26 percent 26 percent
Compliance with regulations and strategy 34 percent 31 percent 32 percent 37 percent
Soft value 26 percent 37 percent 32 percent 44 percent


In an e-book by Bob Ferrari, managing director of the Ferrari Consulting and Research Group, the case is made for tight integration of NPI and supply chain management. It’s well worth reading, particularly as this is a development we’re likely to see across all commercial sectors—sooner rather than later.

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