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1、Design for Supply Chain Management,Phil Kaminskykaminskyieor.berkeley.edu,David Simchi-LeviPhilip KaminskyEdith Simchi-Levi,The Manufacturing Environment,Rapid ChangesNew products rapidly introducedShort,unknown product life cyclesHigh Variety of ProductsLong Production Lead TimesIncreasing storage
2、and transportation costsDifficult to forecast demand,The Goals of the Manufacturing Organization,ResponsivenessCompetitive pricingEfficiencyCustomer service,Conflicting Goals!,Why Do These Goals Conflict?,Forces for keeping low inventoryinventory expensivelow salvage valuesForces for keeping high in
3、ventorylong lead times customer service is importantdemand is hard to predictreduction in transportation quantity,Design For Logistics,Product and process design key cost drivers of product costDesign for Manufacturing used design to decrease manufacturing costsMajor supply chain costs include trans
4、portation costs,inventory costs,distribution costs,Design For Logistics,Design for Logistics uses product design to address logistics costsKey Concepts of Design for LogisticsEconomic packaging and transportationConcurrent/Parallel ProcessingStandardization,Economic Transportation and Storage,Design
5、 products so that they can be efficiently packed and storedDesign packaging so that products can be consolidated at cross docking pointsDesign products to efficiently utilize retail space,Examples,Ikea Worlds largest furniture retailer131 stores in 21 countriesLarge stores,centralized manufacturing,
6、compactly and efficiently packed productsRubbermaidClear Classic food containers-designed to fit 14x14”Wal-Mart shelves,Concurrent/Parallel Processing,Objective is to minimize lead timesAchieved by redesigning products so that several manufacturing steps can take place in parallelModularity/Decoupli
7、ng is key to implementationEnables different inventory levels for different parts,The Network Printer Example,Stage 1(Europe),Stage 2+Integration(Far East),Customer(Europe),Board,Printer,Stage 1(Europe),Integration(Europe),Customer(Europe),Board,Printer,Plastics,motors,etc.,Stage 2(Far East),Standar
8、dization,Shortening lead times is not always possibleHow else can inventory levels be reduced and forecast accuracy improved?Standardization of products and processesProduct commonalityProcess commonality,Modularity in Product and Process,Modular Product:Can be made by appropriately combining the di
9、fferent modulesIt entails providing customers a number of options for each moduleModular Process:Each product undergo a discrete set of operations making it possible to store inventory in semi-finished formProducts differ from each other in terms of the subset of operations that are performed on the
10、m,Modularity in Product and Process,Semiconductor wafer fabrication is modular since the type of chip produced depends on the unique set of operations performedOil refining is not modular since it is continuous and inventory storage of semi-finished product is difficult,Modularity in Product and Pro
11、cess,Are modular products always made from modular processes?,Modularity in Product and Process,Modular products are not always made from modular processesBio-tech and pharmaceutical industries make modular products but use non-modular processes;many products are made by varying the mix of a small n
12、umber of ingredients,Types of Standardization,Part StandardizationCommon parts are used across many processesProduct redesign might be necessaryProcess StandardizationStandardizing as much of the process as possible,making a generic or family productDelaying differentiationCalled“Delayed differentia
13、tion”,“Postponement”,Postponement:Example,Demand for black t-shirts50%probability 10050%probability 200Same for white t-shirtsProduction alternativesProduce 150 of each color ahead of timeProduce 300 which can be dyed after demand is observed,Postponement:Example,First Alternative25%probability-shor
14、t 50 of each25%probability-extra 50 of each50%probability-short 50 of one,extra 50 of the otherSecond Alternative25%probability-short 50 of each25%probability-extra 50 of each50%probability-no shortage or extra,Postponement:Key Concepts,Delay differentiation of products in the same family as late as
15、 possibleEnables the use of aggregate forecastsEnables the delay of detailed forecastsReduces scrapped or obsolete inventory,increases customer serviceMay require new processes or product design with associated costs,Postponement Considerations,Tradeoff increased product cost with decreased inventor
16、yNeed to decide where to postpone-the push-pull boundaryPosition in product lifecycle is factor in postponement strategiesInventory value may increaseConsider tariffs and duties,Hewlett-Packard:LaserJets,LaserJets are manufactured in JapanPreviously,the printers had two different power supplies(110,
17、220 volts)Differentiation had to happen immediatelyAn improved design enables a single power supply to work for both voltages.5%Cost Savings,Hewlett-Packard Disk DrivesManufacturing Process Redesign,HPs disk drive division supplied several customers,Customer 1,Customer 2,Customer 3,PCB Insertion,tes
18、ts,Customer 1,Customer 2,Customer 3,PCB Insertion,tests,CouponInsertion,common tests,PCB insertion postponed,Benetton Background,A world leader in knitwearMassive volume,many storesLogisticsLarge,flexible production networkMany independent subcontractorsSubcontractors responsible for product movemen
19、tRetailersMany,small stores with limited storage,Benetton Supply Cycle,Primary collection in stores in JanuaryFinal designs in March of previous yearStore owners place firm orders through July Production starts in July based on first 10%of ordersAugust-December stores adjust orders(colors)80%-90%of
20、items in store for January salesMini collection based on customer requests designed in January for Spring salesTo refill hot selling itemsLate orders as items sell outDelivery promised in less than five weeks,Benetton Flexibility,Business goalsIncrease sales of fashion itemsContinue to expand sales
21、networkMinimize costsFlexibility important in achieving these goalsHard to predict what items,colors,etc.will sellCustomers make requests once items are in storesSmall stores may need frequent replenishments,It is hard to be flexible when.,Lead times are longRetailers are committed to purchasing ear
22、ly ordersPurchasing plans for raw materials are based upon extrapolating from 10%of the orders,How to be flexible?,Postponement,BenettonOld Manufacturing Process,Spin or Purchase Yarn,Dye Yarn,Finish Yarn,Manufacture Garment Parts,Join Parts,BenettonNew Manufacturing Process,Spin or Purchase Yarn,Ma
23、nufacture 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 madeWhat does the change result in?Delayed forecasts of specific colorsStill use aggregate forecasts t
24、o start manufacturing earlyReact to customer demand and suggestionsIssues with postponementCosts are 10%higher for manufacturingNew processes had to be developedNew equipment had to be purchased,Procurement Standardization,Consider a large semiconductor manufacturerThe wafer fabrication facility pro
25、duces highly customized integrated circuitsProcessing equipment that manufactures these wafers are very expensive with long lead time and are made to orderAlthough 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 in
26、vesting in the wrong equipment by pooling demand across a variety of products,Product Standardization,Downward SubstitutionProduce only a subset of products(because producing each one incurs high setup cost)Guide customers to existing productsSubstitute products with higher feature set for those wit
27、h lower feature setWhich products to offer,how much to keep,how to optimally substitute?,A Framework for Standardization,Modular,Product Standardization,ProcurementStandardization,Non-Modular,Non-Modular,Modular,Product,Process,ProcessStandardization,PartStandardization,Leverage equipment and partco
28、mmonality across products,Carry a limited number of products in inventory,Maximize component commonality across products,Delay customization as late as possible,HP DeskJet Case:Background,High volume,high speed manufacturing in VancouverMany different models,all completed in VancouverThree distribut
29、ion centersNorth AmericanAsianEuropeanManufacturing time one weekTransportation lead times:Europe:4-5 weeksUS At distribution centers,simple standardized process,HP DeskJet Case:Analysis,ProblemsHigh inventory levelsInventory imbalance in EuropeCausesUncertainty about correct inventory levelsMany ge
30、ographic options(localization)Long lead timesUncertain marketDifficulty at getting divisions to work togetherWhat are HPs options?,HP DeskJet Case:Options,Short TermRationalize safety stockLong TermAir shipmentEuropean factoryMore inventoryBetter forecastingDC localization,Safety Stock Rationalizati
31、on:Example Europe AB,Recall:Safety Stock=z STD*LT,Evaluating Alternatives,Air Shipment ExpensiveEuropean Factory Not sufficient volumeBetter ForecastingHow?More InventoryMore problemsDC LocalizationWhat will savings be?,Evaluating DC Localization,In DC localization,risk pooling can be used to reduce
32、 total inventory while maintaining service levelsTo evaluate inventory,compare total safety stock held if individual localized units are held in inventory or if generic units are heldOther costs must also be evaluated,Evaluating DC Localization,DC Localization,Safety Stock ReductionCurrent 19,089 un
33、its(3.55 weeks)With localization 12,792 units(2.4 weeks)Other benefitsLower value of transit inventoryFreight reductionsLocal presence of“manufacturing”Customs implicationsLocal procurement of localization materialsBut there are costsProduct redesignDC modifications,Implementation,R&D Support“The pr
34、oduct is working,so why bother?”DC Support“Not our core competency”New packagingCapital investment,Results,Successful implementationMillions savedService levels increasedPackaging won awardsBest practice spread to other HP divisions,Supplier Integration,Competitive forces are driving firms to integr
35、ate suppliers into product developmentSpectrum of Supplier IntegrationNoneWhite Box Informal integrationGrey Box Formal integration,with collaborative teamsBlack Box Interface requirements are given,product is returned,Supplier Integration,What approach is appropriate?Determine internal competencies
36、Determine product development needsIdentify external development and manufacturing needsIf future products have components that require external expertise and can be separated from other components,a black box approach makes sense.If components cannot be separated,a grey box approach makes sense.If
37、some expertise can be found in house,a white box approach might make sense.,The“Bookshelf”Approach,Monitor the development of new technologiesFollow suppliers that have developed expertiseWhen appropriate,integrate these new technologiesThis balances the advantages and disadvantages of being on the
38、cutting edge:No need to gain experience with the technology,because suppliers are doing this for you.Can introduce the technologies when needed.,Mass Customization,The delivery of a wide variety of customized goods at low costThe key is modular products and processes,so that customer requests can be
39、 metAccording to Pine,companies need to evolve towards“modular companies”,with managers ensuring that modules are compatible.Consider National Bicycle,Mass Customization and Supply Chain Management,An advanced supply chain is essentialThis is particularly true when“modules”extend beyond a single company.ConsiderPostponement for regional customizationThe value of strategic partnerships and supplier integrationDell,
