Production and Operations Management: Manufacturing and Services
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Transcript Production and Operations Management: Manufacturing and Services
Coordinated Product and Process
Design
Class 12: 4/13/10
A GENERAL FRAMEWORK
Two distinct chains in organizations:
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.
KEY CHARACTERISTICS OF SUPPLY
CHAIN
Demand uncertainty and variability, in particular,
the bullwhip effect
Economies of scale in production and transportation
Lead time, in particular due to globalization
KEY CHARACTERISTICS OF
DEVELOPMENT CHAIN
Technology
Speed by which technology changes in a particular
industry
Make/Buy
decisions
Decisions on what to make internally and what to
buy from outside suppliers
Product
clock speed
structure
Level of modularity or integrality in a product
Modular product
assembled 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
INTERACTION BETWEEN THE TWO CHAINS
Fisher’s concept of Innovative and Functional 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 high margins.
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
FRAMEWORK FOR MATCHING PRODUCT
DESIGN AND SUPPLY CHAIN STRATEGIES
The impact of demand uncertainty and product introduction
frequency on product design and supply chain strategy
DESIGN FOR LOGISTICS (DFL)
Product and process design that help to control
logistics costs and increase service levels
Economic
packaging and
transportation
Concurrent and parallel processing
Standardization
ECONOMIC TRANSPORTATION AND
STORAGE
Design 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
EXAMPLES
Ikea
World’s largest furniture retailer
131 stores in 21 countries
Large stores, centralized manufacturing, compactly and
efficiently packed products
Rubbermaid
Clear Classic food containers - designed to fit 14x14” WalMart shelves
FINAL PACKAGING
Delay until as late as possible
Repackaging at the cross-docking point is common for
many products
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
TRADITIONAL MANUFACTURING
Set schedules as early as possible
Use large lot sizes to make efficient use of equipment
and minimize costs
Large centralized facilities take advantage of
economies of scale
STANDARDIZATION
Recall:
aggregate demand information is more
reliable
We can have better forecasts for a product family
(rather than a specific product or style)
How to make use of aggregate data ?
Designing the product and manufacturing
processes so that decisions about which specific
product is being manufactured (differentiation)
can be delayed until after manufacturing is
under way
MODULARITY IN PRODUCT AND PROCESS
Modular
Can be made by appropriately combining the
different modules
It entails providing customers a number of options
for each module
Modular
Product:
Process:
Each product undergo a discrete set of operations
making it possible to store inventory in semifinished form
Products differ from each other in terms of the
subset of operations that are performed on them
MODULARITY IN PRODUCT AND PROCESS
Semiconductor wafer fabrication is modular since
the type of chip produced depends on the unique
set of operations performed
Oil refining is not modular since it is continuous
and inventory storage of semi-finished product is
difficult
MODULARITY IN PRODUCT AND PROCESS
Modular products are not always made from
modular processes
Bio-tech and pharmaceutical industries make
modular products but use non-modular processes;
many products are made by varying the mix of a
small number of ingredients
SWAMINATHAN’S FOUR
APPROACHES TO STANDARDIZATION
Part standardization
Process standardization
Product standardization
Procurement standardization
PART STANDARDIZATION
Common parts used across many products.
Common parts reduce:
inventories due to risk pooling
costs due to economies of scale
Excessive part commonality can reduce product
differentiation
May be necessary to redesign product lines or families
to achieve commonality
PROCESS STANDARDIZATION
Standardize
as much of the process as possible
for different products
Customizing the products as late as possible
Decisions about specific product to be
manufactured is delayed until after
manufacturing is under way
Starts by making a generic or family product
Differentiate later into a specific end-product
Postponement
differentiation
or delayed product
DELAYED DIFFERENTIATION
May
be necessary to redesign products
specifically for delayed differentiation
May be necessary to resequence the
manufacturing process to take advantage of
process standardization
Resequencing
modify the order of product manufacturing steps
resequenced operations result in the differentiation
of specific items or products are postponed as much
as possible
POSTPONEMENT
Point of differentiation
BENETTON BACKGROUND
A
world leader in knitwear
Massive volume, many stores
Logistics
Large, flexible production network
Many independent subcontractors
Subcontractors responsible for product movement
Retailers
Many, small stores with limited storage
BENETTON SUPPLY CYCLE
Primary
collection in stores in January
Final designs in March of previous year
Store owners place firm orders through July
Production starts in July based on first 10% of
orders
August - December stores adjust orders (colors)
80%-90% of items in store for January sales
Mini
collection based on customer requests
designed in January for Spring sales
To refill hot selling items
Late orders as items sell out
Delivery promised in less than five weeks
BENETTON FLEXIBILITY
Business
goals
Increase sales of fashion items
Continue to expand sales network
Minimize costs
Flexibility
important in achieving these goals
Hard to predict what items, colors, etc. will sell
Customers make requests once items are in stores
Small stores may need frequent replenishments
IT IS HARD TO BE FLEXIBLE WHEN...
Lead times are long
Retailers are committed to purchasing early orders
Purchasing plans for raw materials are based upon
extrapolating from 10% of the orders
BENETTON
OLD MANUFACTURING PROCESS
Spin or Purchase Yarn
Dye Yarn
Finish Yarn
Manufacture Garment Parts
Join Parts
BENETTON
NEW MANUFACTURING PROCESS
Spin or Purchase Yarn
Manufacture Garment Parts
Join Parts
Dye Garment
Finish Garment
This step is postponed
BENETTON POSTPONEMENT
Why
the change?
The change enables Benetton to start
manufacturing before color choices are made
What
does the change result in?
Delayed forecasts of specific colors
Still use aggregate forecasts to start manufacturing
early
React to customer demand and suggestions
Issues
with postponement
Costs are 10% higher for manufacturing
New processes had to be developed
New equipment had to be purchased
PRODUCT STANDARDIZATION
Downward Substitution
Produce only a subset of products (because producing each
one incurs high setup cost)
Guide customers to existing products
Substitute products with higher feature set for those with
lower feature set
Which products to offer, how much to keep, how to
optimally substitute ?
PROCUREMENT STANDARDIZATION
Consider
a large semiconductor manufacturer
The wafer fabrication facility produces highly
customized integrated circuits
Processing equipment that manufactures these
wafers are very expensive with long lead time and
are made to order
Although there is a degree of variety at the final
product level, each wafer has to undergo a common
set of operations
The firm reduces risk of investing in the wrong
equipment by pooling demand across a variety of
products
OPERATIONAL STRATEGIES FOR
STANDARDIZATION
Process
Nonmodular
Modular
Modular
Parts standardization
Process standardization
Nonmodular
Product standardization
Procurement standardization
Product
SELECTING THE STANDARDIZATION
STRATEGY
If process and product are modular, process
standardization will help to maximize effective
forecast accuracy and minimize inventory costs.
If the product is modular, but the process is not, it is
not possible to delay differentiation. However, part
standardization is likely to be effective.
If the process is modular but the product is not,
procurement standardization may decrease equipment
expenses.
If neither the process nor the product is modular, some
benefits may still result from focusing on product
standardization.
PUSH-PULL BOUNDARY
Pull-based
systems typically lead to:
reduction in supply chain lead times, inventory
levels, and system costs
making it easier to manage system resources
Not
always practical to implement a pullbased 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
strategies can combine push
and pull systems
Portion of the supply chain prior to product
differentiation is typically a push-based supply
chain
Portion of the supply chain starting from the time
of differentiation is a pull-based supply chain.
SUPPLIER INTEGRATION INTO NEW
PRODUCT DEVELOPMENT
Traditionally
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.
THE SPECTRUM OF SUPPLIER INTEGRATION
No single “appropriate level” of supplier integration
None
White box
Informal level of integration
Buyer “consults” with the supplier informally when designing
products and specifications
No formal collaboration
Grey box
Supplier is not involved in design.
Materials/subassemblies supplied as per customer
specifications/design
Formal supplier integration
Collaborative teams between buyer’s and supplier’s engineers
Joint development
Black box
Buyer gives the supplier a set of interface requirements
Supplier independently designs and develops the required
component
APPROPRIATE LEVEL DEPENDS ON
THE SITUATION
Process Steps to follow:
Determine internal core competencies.
Determine current and future new product
developments.
Identify external development and manufacturing
needs.
APPROPRIATE LEVEL DEPENDS ON THE
SITUATION
Black
If future products have components that require
expertise that the firm does not possess, and
development of these components can be separated
from other phases of product development, then
taking
Grey
Box
If separation is not possible
White
Box
Box
If buyer has some design expertise but wants to
ensure that supplier can adequately manufacture
the component
KEYS TO SUPPLIER INTEGRATION
Making
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 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.
MASS CUSTOMIZATION
Evolved
from the two prevailing
manufacturing paradigms of the 20th century
Craft production and mass production.
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
ABSENCE OF TRADE-OFFS
Two
types meant inherent trade-offs
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
MAKING MASS CUSTOMIZATION WORK
Highly skilled and autonomous workers,
processes, and modular units
Managers can coordinate and reconfigure these
modules to meet specific customer requests and
demands
KEY ATTRIBUTES
Instantaneous
Modules and processes must be linked together very
quickly
Allows rapid response to various customer demands.
Costless
Linkages must add little if any cost to the processes
Allows mass customization to be a low-cost
alternative.
Seamless
Linkages and individual modules should be invisible
to the customer
Frictionless
Networks or collections of modules must be formed
with little overhead.
Communication must work instantly
MASS CUSTOMIZATION AND SCM
Many
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
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