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Functional supply chain refers to the supply chain that focuses on functional products. For such products, market demand is relatively stable and it is easier to achieve supply balance. The most important thing for all member companies is to use information on the supply chain to coordinate their activities to minimize costs and improve efficiency, particularly in terms of reducing production, transportation, inventory costs, and converting raw materials into finished goods at the lowest cost.

Characteristics of Functional Supply Chain

Primary Objective: To meet predictable demand at the lowest possible cost.

Manufacturing focus: To maintain a high average utilization rate.

Inventory Strategy: To maintain a high inventory turnover rate and minimum inventory throughout the entire supply chain.

Emphasis on lead time: To shorten lead time as much as possible without increasing costs.

Supplier selection method: Primarily based on cost and quality.

Product design: Maximize benefit while minimizing cost.

The Function of Functional Supply Chain

Functional products are generally used to meet basic user needs with little variation, having a stable and predictable demand and a longer product lifecycle. However, their marginal profit is generally lower, such as daily necessities.

For functional products, it is easy to achieve supply-demand balance due to relatively stable market demand. The most important thing for all members is to use information on the supply chain to coordinate activities, reduce production, transportation, inventory costs, and minimize overall supply chain costs while improving efficiency.

A functional supply chain's benefits include better cost savings, shorter lead times, improved delivery times, efforts to reduce inventory costs, and enhanced overall efficiency. This helps to ensure customer satisfaction, build better brand reputation, and improve profitability.