Adoption and Diffusion of Hi-Technology Product and Related Inventory Policies: An Integrative Literature Review

Adoption and Diffusion of Hi-Technology Product and Related Inventory Policies: An Integrative Literature Review

Gaurav Nagpal (BITS Pilani, India) and Udayan Chanda (BITS Pilani, India)
Copyright: © 2020 |Pages: 14
DOI: 10.4018/IJEA.2020010101

Abstract

The objective of this review article is to study the published research on the inventory modeling and optimization for substitutable technology products with a short product life cycle. This review explains the demand dynamics of technology generation products and how to administer supply chain management of this kind of products than any other functional products. The article does a review of the demand models proposed on the diffusion of innovation products, and then, moves on to the literature review of the multi-item inventory models, followed by the literature review of the inventory modeling of substitutable items. In order to ensure the quality, this study covers the review of the research papers mostly published in reputed SCI or ABDC rated journals. The study discovers that the research that has been done on the inventory optimization of multi generation technology products is not only rare but also very restrictive in its scope and assumptions. The study then proposes the directions for the future research.
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1. Introduction

With the increasing digitalization of our day-to-day work, the role of technology products has been increasing at a very fast pace in our lives. The examples of such products can be data processing devices, data storage devices, routers, mobile handsets, etc. These technology products are generally managed as product families (or as multiple items). Product families are generally the group of related goods that are managed as a whole. This kind of management helps in optimizing the logistics and inventory costs, and also helps in deriving the better efficiencies by pooling the limited resources available to the supply chains.

If we closely observe these product families, many SKUs (stock-keeping unit) in them are substitutable in nature. That is, one or more products serve the similar purpose, and may have a very small differentiation among them in terms of features, packaging, brand, price, aesthetics, etc. Since they are substitutable in nature, they have cross elasticity of demand with price as well as with the stock. Within the ambit of the substitutable products, there are multi-generation products, which are versions of the same product with the successive enhancement of product features, form or function. The technology generation is a group of products that perform the similar function as perceived by the customer. Abell (1980) suggested that the technology generation can be accessed from three dimensions: technology (i.e., novelty), customer (ability to reach newer customer segments) and functional (i.e., the increase in the scope of the functions associated with the product family).

Now, it is important to know why the need for technology generations arises. The technological product industries differ from the conventional industries in the sense that that innovation has an immense influence on it. The new products with better value and added features get introduced in the market from time to time that meet the requirements of the customers better or reach out to the wider base of customers. However, the existing products do not disappear from the market instantly upon introduction of new products, because of the fact that the customers take time to adopt newer products based on the expected utility and cost dynamics. Thus, we land into the situation where we have multiple generations of the product, co-existing in the market at least for some time.

These multiple generations of the technology product add to the market potential, but at the same time are associated with the risk of bringing in the supply chain inefficiencies, if not properly managed. To add to this challenge, the globalization along with stiffer competitive forces has led to compression in the product life cycles. To sustain in such a dynamic environment, we need to have a thorough understanding of technology adoption process and its implications on the supply chain. The interplay of demand among these multiple generations makes it a challenging task to forecast the correct demand and to determine the optimal product availability under optimal promotional and stock-keeping costs.

In such a market, the time to understand the customer needs and serve them with the right product is very small. Thus, it is important for a firm to maintain optimistic inventory in a bid to avoid lost sales due to stock-outs. But at the same time, the higher inventories tend to increase the stock-keeping costs. Thus, the challenge is to determine the optimal inventory carrying policy that strike the right balance between the stock-out costs and inventory carrying costs. This study is categorized into four sections. The Section 1 gives an introduction to this area and explains the motivation behind this review. The Section 2 mentions the summary of the review done on the papers published on this area. It is a mixture of text representation and the tabular representation. The Section 3 brings forward the gaps in the existing research and lays down the future directions and further extensions of research in this domain. Section 4 gives the concluding remarks on this study.

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