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The
supply chain which focuses on the flow of physical products from suppliers through manufacturing and distribution all the way to retail outlets and customers, and The development chain which focuses on new product introduction and involves product architecture, make/buy decisions, earlier supplier involvement, strategic partnering, supplier footprint and supply contracts.
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uncertainty and variability, in particular, the bullwhip effect Economies of scale in production and transportation Lead time, in particular due to globalization
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clock speed
Make/Buy
Decisions
decisions
Product
Level
structure
from a variety of modules each module may have several options Bulk of manufacturing can be completed before the selection of modules and assembly into the final product takes place
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What Is the Appropriate Supply Chain Strategy and Product Design Strategy for Each Product Type?
Each
requires a different supply chain strategy Development chain has to deal with the differing level of demand uncertainty
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technology clock speed, low product variety, and typically low profit margins
Innovative
fast
technology clock speed and short product life cycle, high product variety, and relatively high margins.
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FIGURE 11-3: The impact of demand uncertainty and product introduction frequency on product design and supply chain strategy
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and process design that help to control logistics costs and increase service levels Economic packaging and transportation Concurrent and parallel processing Standardization
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products so that they can be efficiently packed and stored Design packaging so that products can be consolidated at cross docking points Design products to efficiently utilize retail space
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Examples
Ikea
Worlds
largest furniture retailer 131 stores in 21 countries Large stores, centralized manufacturing, compactly and efficiently packed products
Rubbermaid
Clear
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Final Packaging
Delay
until as late as possible Repackaging at the cross-docking point is common for many products
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Concurrent/Parallel Processing
Objective
is to minimize lead times Achieved by redesigning products so that several manufacturing steps can take place in parallel Modularity/Decoupling is key to implementation Enables different inventory levels for different parts
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Push-Pull Boundary
Pull-based
reduction
in supply chain lead times, inventory levels, and system costs making it easier to manage system resources
Not
always practical to implement a pull-based system throughout the entire supply chain
Lead
times may be too long May be necessary to have economies of scale in production or transportation.
Standardization
Portion
lead times, high inventory levels, imbalance of inventory Localization (labeling and manuals, power supply, plug) One cause of imbalance (too much inventory for printers localized for one market, too little inventory for another market) Significant uncertainty on how to set safety stock Too many localization options Uncertainty in local markets Some options Air shipment A factory in Europe Improve forecasting practices (how?)
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management considered postponement as an option Ship unlocalized printers to European DC and localize them after observing the local demand At 98% service level, safety stock dropped from 3.8 weeks supply to 2.6 weeks supply on the average Annual savings around $800,000 Value of inventory in transit (and hence insurance costs) goes down Some of the localization material can be locally sourced (cheaper) European DC had to be modified to facilitate localization. Printer needed to be redesigned. All Vancouver products now DC-localizable (postponement). One of the best of such practices.
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suppliers have been selected after design of product or components However, firms often realize tremendous benefits from involving suppliers in the design process. Benefits include:
a
decline in purchased material costs an increase in purchased material quality a decline in development time and cost an increase in final product technology levels.
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Supplier is not involved in design. Materials/subassemblies supplied as per customer specifications/design Informal level of integration Buyer consults with the supplier informally when designing products and specifications No formal collaboration Formal supplier integration Collaborative teams between buyers and suppliers engineers Joint development Buyer gives the supplier a set of interface requirements Supplier independently designs and develops the required component
White box
Grey box
Black box
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Steps to follow:
Determine
internal core competencies. Determine current and future new product developments. Identify external development and manufacturing needs.
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Black
If
Grey
If
Box Box
White
If
buyer has some design expertise but wants to ensure that supplier can adequately manufacture the component
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suppliers and build relationships with them Align objectives with selected suppliers
Which
Capability
to participate in the design process Willingness to participate in the design process Ability to reach agreements on intellectual property and confidentiality issues. Ability to commit sufficient personnel and time to the process. Co-locating personnel if appropriate Sufficient resources to commit to the supplier integration process.
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Mass
production
efficient
production of a large quantity of a small variety of goods High priority on automating and measuring tasks Mechanistic organizations with rigid controls
Craft
production
involves
highly skilled and flexible workers Often craftsmen Organic organizations which are flexible and changing
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Absence of Trade-Offs
Two
Low-cost,
low-variety strategy may be appropriate for some products For others, a higher-cost, higher-variety, more adaptable strategy was more effective
Development
of mass customization implies it is not 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 mass production and craft production systems not appropriate for all products gives firms important competitive advantages helps to drive new business models
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skilled and autonomous workers, processes, and modular units Managers can coordinate and reconfigure these modules to meet specific customer requests and demands
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Key Attributes
Instantaneous
Modules
must add little if any cost to the processes Allows mass customization to be a low-cost alternative.
Seamless
Linkages
Frictionless
Networks
or collections of modules must be formed with little overhead. Communication must work instantly
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of the advanced SCM approaches and techniques essential if mass customization is to be successfully implemented IT critical for effective SCM is also critical for coordinating different modules Concepts like strategic partnerships and supplier integration essential for the success of mass customization. Postponement can play a key role in implementing mass customization
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SUMMARY
Design
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
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