Chapter 11A Coordinated Product and Supply Chain Download

8/3/2019 Chapter 11A Coordinated Product and Supply Chain Download

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Chapter 11

Coordinated Product andSupply Chain Design


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11.1 A General Framework

Two distinct chains in organizations:The supply chain which focuses on the flowof physical products from suppliers throughmanufacturing and distribution all the way toretail outlets and customers, andThe development chain which focuses onnew product introduction and involves productarchitecture, make/buy decisions, earlier supplier involvement, strategic partnering,supplier footprint and supply contracts.


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Key Characteristics of Supply Chain

Demand uncertainty and variability , inparticular, the bullwhip effectEconomies of scale in production andtransportationLead time , in particular due toglobalization


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Technology clock speedSpeed by which technology changes in a particular industry

Make/Buy decisionsDecisions on what to make internally and what to buyfrom outside suppliers

Product structureLevel of modularity or integrality in a product

Modular productassembled from a variety of moduleseach module may have several optionsBulk of manufacturing can be completed before theselection of modules and assembly into the final product

takes place

Key Characteristics of Development Chain


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What Is the Appropriate SupplyChain Strategy and Product DesignStrategy for Each Product Type?Each requires a different supply chain

strategyDevelopment chain has to deal with thediffering level of demand uncertainty


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Interaction between the Two Chains

Fishers concept of Innovative andFunctional Products

Functional products characterized by:

slow technology clock speed, low product variety,and typically low profit margins

Innovative products characterized by:fast technology clock speed and short product life

cycle, high product variety, and relatively highmargins.


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Framework for Matching ProductDesign and Supply Chain Strategies

FIGURE 11-3: The impact of demand uncertainty and productintroduction frequency on product design and supply chain strategy


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11.2 Design for Logistics (DFL)

Product and process design that help tocontrol logistics costs and increase servicelevels

Economic packaging and transportationConcurrent and parallel processingStandardization


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Economic Packaging andTransportation

Design products so that they can beefficiently packed and storedDesign packaging so that products can beconsolidated at cross docking pointsDesign products to efficiently utilize retailspace


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Examples

IkeaWorlds largest furniture retailer 131 stores in 21 countries

Large stores, centralized manufacturing,compactly and efficiently packed products

Rubbermaid

Clear Classic food containers - designed to fit14x14 Wal-Mart shelves


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Final Packaging

Delay until as late as possibleRepackaging at the cross-docking point iscommon for many products


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Concurrent/Parallel Processing

Objective is to minimize lead times Achieved by redesigning products so thatseveral manufacturing steps can take

place in parallelModularity/Decoupling is key toimplementation

Enables different inventory levels for different parts


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Push-Pull BoundaryPull-based systems typically lead to:

reduction in supply chain lead times, inventory levels,and system costsmaking it easier to manage system resources

Not always practical to implement a pull-based

system throughout the entire supply chainLead times may be too longMay be necessary to have economies of scale inproduction or transportation.

Standardization strategies can combine pushand pull systems

Portion of the supply chain prior to productdifferentiation is typically a push-based supply chainPortion of the supply chain starting from the time of differentiation is a pull-based supply chain.


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Long lead times, high inventory levels, imbalance of inventoryLocalization (labeling and manuals, power supply, plug)One cause of imbalance (too much inventory for printerslocalized for one market, too little inventory for another market)

Significant uncertainty on how to set safety stockToo many localization optionsUncertainty in local markets

Some options Air shipment A factory in EuropeImprove forecasting practices (how?)

Back to the HP Case


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HP management considered postponement as an option

Ship unlocalized printers to European DC and localizethem after observing the local demand At 98% service level, safety stock dropped from 3.8weeks supply to 2.6 weeks supply on the average

Annual savings around $800,000Value of inventory in transit (and hence insurancecosts) goes downSome of the localization material can be locallysourced (cheaper)European DC had to be modified to facilitatelocalization. Printer needed to be redesigned.

All Vancouver products now DC-localizable(postponement). One of the best of such practices.

Back to the HP Case


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11.3 Supplier Integration into NewProduct Development

Traditionally suppliers have been selected after design of product or componentsHowever, firms often realize tremendous

benefits from involving suppliers in the designprocess.Benefits include:

a decline in purchased material costsan increase in purchased material qualitya decline in development time and costan increase in final product technology levels.


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The Spectrum of Supplier IntegrationNo single appropriate level of supplier integration

NoneSupplier is not involved in design.Materials/subassemblies supplied as per customer specifications/design

White box

Informal level of integrationBuyer consults with the supplier informally when designingproducts and specificationsNo formal collaboration

Grey boxFormal supplier integrationCollaborative teams between buyers and suppliers engineersJoint development

Black boxBuyer gives the supplier a set of interface requirementsSupplier independently designs and develops the requiredcomponent


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Appropriate Level Depends on theSituation

Process Steps to follow:Determine internal core competencies.Determine current and future new productdevelopments.Identify external development andmanufacturing needs.


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Black BoxIf future products have components that requireexpertise that the firm does not possess, anddevelopment of these components can be separatedfrom other phases of product development, then taking

Grey BoxIf separation is not possible

White BoxIf buyer has some design expertise but wants toensure that supplier can adequately manufacture thecomponent

Appropriate Level Depends on theSituation


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Keys to Supplier IntegrationMaking the relationship a success:

Select suppliers and build relationships with them Align objectives with selected suppliers

Which suppliers can be integrated?

Capability to participate in the design processWillingness to participate in the design process Ability to reach agreements on intellectual property andconfidentiality issues.

Ability to commit sufficient personnel and time to theprocess.Co-locating personnel if appropriateSufficient resources to commit to the supplier

integration process.


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11.4 Mass CustomizationEvolved from the two prevailing manufacturingparadigms of the 20th century

Craft production and mass production.Mass production

efficient production of a large quantity of a small varietyof goodsHigh priority on automating and measuring tasksMechanistic organizations with rigid controls

Craft productioninvolves highly skilled and flexible workersOften craftsmenOrganic organizations which are flexible and changing


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Absence of Trade-OffsTwo types meant inherent trade-offs

Low-cost, low-variety strategy may be appropriate for some productsFor others, a higher-cost, higher-variety, moreadaptable strategy was more effective

Development of mass customization implies it isnot always necessary to make this trade-off Mass customization

delivery of a wide variety of customized goods or services quickly and efficiently at low cost

captures many of the advantages of both the massproduction and craft production systemsnot appropriate for all productsgives firms important competitive advantageshelps to drive new business models


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Making Mass CustomizationWork

Highly skilled and autonomous workers,processes, and modular unitsManagers can coordinate and reconfigurethese modules to meet specific customer requests and demands


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Key AttributesInstantaneous

Modules and processes must be linked together veryquickly Allows rapid response to various customer demands.

CostlessLinkages must add little if any cost to the processes

Allows mass customization to be a low-cost alternative.

SeamlessLinkages and individual modules should be invisible to

the customer FrictionlessNetworks or collections of modules must be formedwith little overhead.Communication must work instantly


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Mass Customization and SCMMany of the advanced SCM approaches andtechniques essential if mass customization is tobe successfully implementedIT critical for effective SCM is also critical for

coordinating different modulesConcepts like strategic partnerships and supplier integration essential for the success of masscustomization.

Postponement can play a key role inimplementing mass customization


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SUMMARYDesign for logistics concepts

Efficient packaging and storageCertain manufacturing steps can becompleted in parallel

StandardizationIntegrating suppliers into the productdesign and development process

Advanced supply chain managementfacilitating mass customization

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Chapter 11A Coordinated Product and Supply Chain Download

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