A01 chaf6542 06 se fm indd

 Radio-  frequency 

identification (RFID)

 Microchip‑  based 

electronic tags are used 

for monitoring anything 

they are attached to, 

whether inanimate 

products or animate 

(people).

The Internet of 

Things

Objects are uniquely 

identified and tagged 

through technologies 

such as RFID and made 

accessible through 

 Internet‑  like  addresses.

Machine-to- 

machine (M2M) 

applications

Objects are uniquely 

identified and tagged 

through technologies 

such as RFID and made 

accessible through 

 Internet‑  like  addresses.

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Chapter 6  Supply chain management

should be directed at cost reduction and efficiency. For more complex products, includ‑

ing those with less predictable demand, Fisher (1997) gives the example of two contrasting 

products, skiwear from Sport Obermayer and soup from Campbell. Each year, 95% of Sport 

Obermayer’s products are new designs and demand forecasts may err by over 200%. In con‑

trast, 95% of Campbell’s products are similar each year, with predictable demand levels. The 

strategic response for these products is to develop a physically efficient supply chain in the 

former case and a  market‑  responsive supply chain in the latter case.

In a company such as Campbell the biggest cost savings are possible by reviewing the struc‑

ture of the supply chain as a whole. In 1991 the company operationalised what it referred to 

as a ‘continuous replenishment programme’. It set up EDI links with major retailers and each 

morning retailers electronically inform Campbell of their demand for all products. Campbell 

then uses this information to determine which products require replenishment. Trucks leave 

Campbell’s shipping plants and then arrive at the retailers’ distribution centres each day. 

This approach reduced the inventory of participating retailers from about four weeks to two 

weeks, with the associated cost reductions. This is the equivalent of a 1% increase in sales. 

This does not sound like a large improvement, but retailers’ margins are thin, so this trans‑

lates to a large increase in profitability on these product lines. The problem that Campbell 

encountered was that when it ran price promotions this could lead to up to five times the 

demand. This cannot be fulfilled on a short timescale so manufacture and retailer have to 

cooperate on advanced buying to meet these peaks in demand.