Coordinating Products & SC Design

Two distinct CHAINS in organizations:

- SC  focus on the flow of physical products
- Development Chain  focus on the new product introduction

Key characteristics of SC
- Demand uncertainty and variability  lead to the bullwhip effect
- Economies of scale  production and transportation
- Lead time  concern related in particular to globalization
- Inventory management  along the network

Key characteristics of Development Chain

- Technology clock speed  frequency of changing
- Make/ Buy decisions  what to make internally and what to
outsource
- Product Structure  modularity or integrality
The appropriate SC strategy will always be different for each product.
The Development Chain has to deal with the differing level of demand
uncertainty.
It depends on the type of product.
Design for logistics – uses product design to address logistics costs
- Product and process design  key to cost drivers of product cost
- Design for manufacturing  using design to decrease
manufacturing costs
- Major supply chain costs:
- transportation costs
- inventory costs
- distribution costs
- Key concepts:
- economic packaging, transportation and storage
- concurrent processing
- standardization

Economic packaging
- Design products for them to be efficiently packed and stored
- Design packaging for them to be consolidated at cross docking points
- Design products to efficiently utilize retail space

- Final packaging
- Delay until as late as possible (transport in bulk)
- Repackaging at the cross-docking point is common for many
products

Concurrent/Parallel Processing
- Minimize lead times
- Redesigning products so that steps can take place in parallel
- Modularity is key to this implementation
- Enables different inventory levels for different parts

Standardization (aggregate demand information is more reliable)

- We can have better forecasts for a product family
- Delay decisions about a specific product that is being manufactured
(differentiation)
-
If we have suppliers that can standardize the products its better.
 Identify the name
define which is
Advantages and disadvantages
Justify

Modularity in Product and Process

- Product:
Made by several different modules.
It provides different options for each module for customers.
Example: portable computer
 - Process:
Each product undergoes a set of operations making possible to store
inventory in semi-finished form.

Four Approaches to Standardization

- Part Standardization
o Common parts used across many products
 Inventories due to risk pooling
 Costs due to economies of scale
o Excessive similar parts
 Can reduce product differentiation
 May be necessary to redesign some product lines or
families to achieve standardization
o If the product is modular, but the process is not, it is not
possible to delay differentiation. This part … is likely to be
effective..
- Process …
The same process gives different final products (ex: push-pull
strategy)
it delay differentiation of the final product (postponement) push-
pull strategies
Advantages – we are standardizing, different of the two lines;
combining production; reduce the lead time, because we produce to
have the pieces ready; economies of scale, because we are forecasting;
risk polling until the end of push part; in pull part, we reduce the
uncertainty. It will maximize forecast accuracy and minimize
inventory costs.
- Product …
Use the same product to different final markets (ex: temos a venda
varias pen’s com varios gigas, mas so produzimos de 20 gigas e 100, se
pedirem uma pen de 30 gigas, dizem que houve um upgrade e dao
uma de 100 pelo mesmo preço de uma de 30) we upgrade to fullfill
the client requirements.
- Procurement …
Activity/supplier the same. Using the same activity/supplier for
different item. Decreasing equipment expenses.
Important considerations
Changes suggested in the strategies may be too expensive to implement
Tariffs and duties are lower for smi-finished or non-configured goods than for
final products.

Standardization helps SC strategy

- Pull-based systems lead to:

- Reduction on lead times, inventory levels and system costs
- More easier do manage resources
But it isn’t always practical because the lead times may be too long, it
might be mandatory to have economies of scale in production or
transportation.
- These methods of standardization could combine push and pull
systems.
Normally the first part of SC its a push strategy and the other half is
pull strategy, starting from the time of differentiation.

The spectrum of supplier integration

- None  supplier isn’t evolved in design

- White Box  informal level of integration; Buyer consults with the
supplier informally when designing products and specification
- Grey box  formal supplier integration; joint development
- Black box  buyer gives th supplier a set of interface requirements;
suppler independently designs and develops the required component
To evaluate the appropriate level dependencies:
- Determine internal core competencies
- Determine current and future new product developments
- Identify external development and external needs
- Product characteristics
- Analyze capability and knowledge
Summary:
Design for logistics concepts
- Efficient packaging and storage
- Certain manufacturing steps can be completed in parallel
- Standardization
Integrating suppliers into the product design and development process
Advanced supply chain management facilitating mass customization