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A Thesis Entitled

Product Driven Approach to Manufacturing Supply Chain Product Driven Approach to Manufacturing Supply Chain DesignDesign

by

Mohit UppalMohit Uppal

Advisor: Dr. Samuel HuangAdvisor: Dr. Samuel Huang

Committee Members: Committee Members:

Dr. Mark VonderembseDr. Mark Vonderembse

Dr. John P. DismukesDr. John P. Dismukes

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AcknowledgementsAcknowledgementsAcknowledgementsAcknowledgements

Dr. Samuel HuangDr. Samuel Huang Dr. Mark Vonderembse and Dr. John P. Dr. Mark Vonderembse and Dr. John P.

DismukesDismukes ICAMS Research Group MembersICAMS Research Group Members

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Presentation OutlinePresentation OutlinePresentation OutlinePresentation Outline

Research ObjectivesResearch Objectives Thesis StructureThesis Structure IntroductionIntroduction Types of Supply ChainsTypes of Supply Chains Literature ReviewLiterature Review MethodMethod

Product typesProduct types Difference between Lean, Hybrid and Agile Supply Difference between Lean, Hybrid and Agile Supply

ChainsChains

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Presentation Outline (Continued)Presentation Outline (Continued)Presentation Outline (Continued)Presentation Outline (Continued)

Classic Product Life Cycle ModelClassic Product Life Cycle Model

Supply Chain Design for Product Cycle Curves Supply Chain Design for Product Cycle Curves (model 1)(model 1)

Supply Chain Design for Product Types (models 2a Supply Chain Design for Product Types (models 2a and 2b)and 2b)

Product Categorization (Interactive Tool)Product Categorization (Interactive Tool) ConclusionConclusion

SummarySummary ContributionsContributions Future ResearchFuture Research

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Research ObjectivesResearch ObjectivesResearch ObjectivesResearch Objectives

To correctly define the current supply chains in practice: lean and agile. It combines these two paradigms to introduce a third type: hybrid supply chain.

To clearly differentiate between the three types of supply chains.

To develop model(s), which an organization To develop model(s), which an organization would be able to adopt, depending on its would be able to adopt, depending on its products, in order to gain a competitive edge.products, in order to gain a competitive edge.

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Research Objectives (Continued)Research Objectives (Continued)Research Objectives (Continued)Research Objectives (Continued)

To develop a visual tool to aid in product categorization.

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Introduction Introduction Introduction Introduction

History of ManufacturingHistory of Manufacturing Mass Production Mass Production

Mass producing standardized products quickly and efficientlyMass producing standardized products quickly and efficiently Limited varietyLimited variety

The TQM ParadigmThe TQM Paradigm High quality expected along with reduced lead time and priceHigh quality expected along with reduced lead time and price Was taken as a market qualifierWas taken as a market qualifier

Supply Chain Management (SCM)Supply Chain Management (SCM) Reducing costs over the entire chain (suppliers, manufacturers, Reducing costs over the entire chain (suppliers, manufacturers,

distributors and customersdistributors and customers Respond quickly to customer needsRespond quickly to customer needs

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Introduction (Continued)Introduction (Continued)Introduction (Continued)Introduction (Continued)

SCM - SCM - “ the management of materials and information both in and between facilities, such as vendors, manufacturing and assembly plants and distribution centers” (Thomas, 1999)

SCM - Drawbacks Flow of information across the chain was not instantaneous

(bullwhip effect) Strategic alliances were not formed with suppliers Importance of distribution was not recognized Led to the formation of the Lean supply chain

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Types of Supply ChainsTypes of Supply ChainsTypes of Supply ChainsTypes of Supply Chains

Lean supply chain (LSC)Lean supply chain (LSC) Agile supply chain (ASC)Agile supply chain (ASC) Hybrid supply chain (HSC)Hybrid supply chain (HSC)

Lean - “Lean - “A lean supply chain employs continuous improvement to focus on the elimination of waste or non-value added stops across the chain. It is supported by the reduction of set up times to allow for the economic production of small quantities, thereby achieving cost reduction, flexibility and internal responsiveness”

LSC employs lean production and time compression in parallel

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Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)

Is economical, flexible and internally responsive May participate in traditional alliances such as

partnerships and joint ventures. Drawbacks

Mass customization/Responsiveness squeeze Evolution of ‘multiple niche competition’ (Booth, 1996) LSC - Not adaptable to future market requirements Led to the formation of a Agile supply chain

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Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)

Agile - “Agile - “relates to the interface between a company and the market. It profits by responding to rapidly changing, continually fragmenting global markets by being dynamic, context-specific, aggressively changing and growth oriented, driven by customer designed products and services”

Advocates agile manufacturing, which is a further development of lean manufacturing

Responds to unpredictable market changes and capitalizes on them

Exploits a dynamic type of alliance known as a “virtual organization”

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Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)

Hybrid - “Hybrid - “A hybrid supply chain generally involves “assemble to order” products whose demand can be quite accurately forecasted. The chain helps to achieve mass customization by postponing product differentiation until final assembly. The lean supply chain is utilized for component production. The agile part of the chain establishes a company-market interface to understand and satisfy requirements by being responsive and innovative”

Employs lean manufacturing techniques May utilize agile manufacturing for producing

innovative component(s), which, at times, form a part of the product

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Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)Types of Supply Chains (Continued)

Option of participating in traditional as well as Option of participating in traditional as well as virtual alliancesvirtual alliances

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Literature ReviewLiterature ReviewLiterature ReviewLiterature Review

One of the critical contributions has been One of the critical contributions has been made by made by Naylor, Naim and Berry, (1999)

They They proposed the use of the lean and agile concept with the aid of a decoupling point

The model highlights how the decoupling point satisfies different manufacturing types

Its importance is that it helps in the development of a new concept, the hybrid supply chain

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Literature Review (Continued) Literature Review (Continued) Literature Review (Continued) Literature Review (Continued)

Raw Material Supplier

Manufacturers/Assemblers

Retailer End - Users

A Stock Decoupling Point

Buy to order

Make to order

Assemble to order

Make to stock

Ship to stock

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MethodMethodMethodMethod

Product typesProduct types StandardStandard InnovativeInnovative HybridHybrid

Standard ProductsStandard Products Produced with the help of a LSC (example:staples)Produced with the help of a LSC (example:staples) Demand can be accurately forecastedDemand can be accurately forecasted Market share remains fairly constantMarket share remains fairly constant Enjoy long life cycles (>2 years)Enjoy long life cycles (>2 years)

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Superficial design changesSuperficial design changes Utilization of lean production techniques consisting of Utilization of lean production techniques consisting of

reduced lead-time, efficiency, flexibility, cost cutting and a level schedule over the supply chain

Employs a LSC over the entire product life cycle

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Innovative Products Produced with the help of an ASC

(example:personal computer) Unpredictable demand patterns Developed to capture a wider market share Significantly different from available product typesSignificantly different from available product types Suited to customer requirements (mass Suited to customer requirements (mass

customization)customization) Short life cycles (3 months - 1 year)Short life cycles (3 months - 1 year)

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Employs an ASC over the first 2 stages of life Employs an ASC over the first 2 stages of life cycle:introduction and growthcycle:introduction and growth

Employs a HSC over the last 2 stages:maturity and Employs a HSC over the last 2 stages:maturity and declinedecline

Utilizes a strategic tool provided by ASC:Virtual Utilizes a strategic tool provided by ASC:Virtual organizationorganization

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Virtual organizations - Virtual organizations - “A virtual organization is the integration of core competencies distributed among a number of carefully chosen but real organizations all with the similar supply chain focusing on quick to market, cost reduction and quality” (Gunasekaran, 1999a) Example: Dell and Apple computers

They help to create or assemble new productive resources very quickly, frequently and concurrently as long as it is economically justifiable

Provide access to a range of world class competencies

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Hybrid productsHybrid products Consists of eitherConsists of either

Different combinations of standard componentsDifferent combinations of standard components Mix of standard and innovative componentsMix of standard and innovative components

LSC is utilized for component productionLSC is utilized for component production ASC establishes a company-market interfaceASC establishes a company-market interface Example:AutomobileExample:Automobile

Components (‘A’ class) are manufactured by the OEM Components (‘A’ class) are manufactured by the OEM and suppliers (‘B’ and ‘C’ class) by utilizing lean and suppliers (‘B’ and ‘C’ class) by utilizing lean production techniquesproduction techniques

Agility is obtained by the OEM by constantly interacting Agility is obtained by the OEM by constantly interacting with the market and adapting to its changeswith the market and adapting to its changes

Employs a HSC over the entire product life cycleEmploys a HSC over the entire product life cycle

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Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chainsand Agile Supply Chains

Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chainsand Agile Supply Chains

An in-depth analysis to clearly differentiate An in-depth analysis to clearly differentiate between the 3 chains is done on the basis of the between the 3 chains is done on the basis of the following categoriesfollowing categories DefinitionDefinition PurposePurpose Type of Manufacturing utilizedType of Manufacturing utilized IntegrationIntegration DependencyDependency Type of Products and Life cycleType of Products and Life cycle

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Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chains (continued)and Agile Supply Chains (continued)

Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chains (continued)and Agile Supply Chains (continued)

AlliancesAlliances MarketsMarkets Organizational StructureOrganizational Structure Type of FirmsType of Firms Approach to choosing suppliersApproach to choosing suppliers Demand patternsDemand patterns Inventory strategyInventory strategy Lead time focusLead time focus Manufacturing focusManufacturing focus

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Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chains (continued)and Agile Supply Chains (continued)

Difference between Lean, Hybrid Difference between Lean, Hybrid and Agile Supply Chains (continued)and Agile Supply Chains (continued)

Product Design StrategyProduct Design Strategy Human ResourcesHuman Resources

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Method (Continued) - Classic Method (Continued) - Classic Product Life Cycle ModelProduct Life Cycle Model

Method (Continued) - Classic Method (Continued) - Classic Product Life Cycle ModelProduct Life Cycle Model

Introduction Growth Maturity Decline

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Classic Product Life Cycle Model (page 25) - CPLCM Introduction Growth Maturation Decline

Assumptions for proposed Model To aid organizations in developing and

adopting the correct supply chain Developed for manufacturing industries Product driven

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Method (Continued)Method (Continued)Method (Continued)Method (Continued)

Related to Product Life Cycle stagesRelated to Product Life Cycle stages High level modelHigh level model Resources for implementation availableResources for implementation available Hybrid products:Hybrid products:

Standard componentsStandard components Mix of standard and innovative componentsMix of standard and innovative components

Agility dependant on innovativenessAgility dependant on innovativeness Questionnaire based on previously published Questionnaire based on previously published

literatureliterature Model considers only a single product introduced by Model considers only a single product introduced by

the organizationthe organization

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Supply Chain types for Product Supply Chain types for Product Cycle Curves (Innovative Products) Cycle Curves (Innovative Products)

Supply Chain types for Product Supply Chain types for Product Cycle Curves (Innovative Products) Cycle Curves (Innovative Products)

Introduction Growth Maturity Decline

AGILESUPPLY CHAIN

HYBRIDSUPPLYCHAIN

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Supply Chain types for Product Supply Chain types for Product Cycle Curves (Continued)Cycle Curves (Continued)

Supply Chain types for Product Supply Chain types for Product Cycle Curves (Continued)Cycle Curves (Continued)

The model depicted previously (Supply chain The model depicted previously (Supply chain types for product cycle curves - model 1) is for types for product cycle curves - model 1) is for innovative products (page 32)innovative products (page 32)

Standard products follow a Lean supply chain Standard products follow a Lean supply chain for their entire life cyclefor their entire life cycle

Hybrid products follow a Hybrid Supply chain Hybrid products follow a Hybrid Supply chain for their entire life cyclefor their entire life cycle

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Supply Chain Types for Product Supply Chain Types for Product Cycle Curves (Continued)Cycle Curves (Continued)

Supply Chain Types for Product Supply Chain Types for Product Cycle Curves (Continued)Cycle Curves (Continued)

Supply Chain Design for Product Types (models 2a and 2b) helps in identifying the product manufactured by an organization and provides guidance in the adoption of the correct supply chain

Following is the representation of model 2a Following is the representation of model 2a (Product introduction - pg. 34) and model 2b (Product introduction - pg. 34) and model 2b (Product categorization and adoption of correct (Product categorization and adoption of correct supply chain - pg. 35)supply chain - pg. 35)

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Product Introduction (Model 2a)Product Introduction (Model 2a)Product Introduction (Model 2a)Product Introduction (Model 2a)

CUSTOMER

PRODUCT

CONCEPTUAL DESIGN

FUNCTIONAL PRODUCT INNOVATIVE PRODUCT

INCREMENTAL RADICAL

DETAILED DESIGN OF PRODUCTS

BILL OF MATERIALS (BOM)

Model 2a Unique needs, desires

To suit customerrequirements

Based on customer needs

Adding onexisting designs Completely

new concept

To identify components

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Product Categorization and adoption Product Categorization and adoption of correct Supply Chain (Model 2b)of correct Supply Chain (Model 2b)

Product Categorization and adoption Product Categorization and adoption of correct Supply Chain (Model 2b)of correct Supply Chain (Model 2b)

CHECK WHICH CATEGORY DO THEPRODUCTS FALL UNDER

FUNCTIONAL HYBRID INNOVATIVE

FUNCTIONALPRODUCT

HYBRIDPRODUCT

LEANSUPPLYCHAIN

HYBRIDSUPPLYCHAIN

SATISFYCUSTOMER

PROFIT

HYBRIDPRODUCT

RADICALLYINNOVATIVE PRODUCT

AGILESUPPLYCHAIN

HYBRIDSUPPLYCHAIN

Using the Visual tool

By differentcombinationsof standardcomponents

Mix ofstandard andinnovativecomponents

Innovativecomponents

Model 2b

Introductionand growthstages ofPLC

Maturity anddecline stagesof PLC

Over entirePLC

Over entirePLC

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Product CategorizationProduct CategorizationProduct CategorizationProduct Categorization

Achieved with the help of a questionnaireAchieved with the help of a questionnaire Three levels of questions involved:Three levels of questions involved:

Level 1 - critical ( 5 questions)Level 1 - critical ( 5 questions) Level 2 - significantly important ( 8 questions)Level 2 - significantly important ( 8 questions) Level 3 - important ( 2 questions)Level 3 - important ( 2 questions)

Points for each product typePoints for each product type Functional products: 1 - 3Functional products: 1 - 3 Hybrid products: 4 - 6Hybrid products: 4 - 6 Innovative products: 7 - 10Innovative products: 7 - 10

Interactive tool used: Visual BasicInteractive tool used: Visual Basic

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Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)

Computational method used - Weighted Computational method used - Weighted AverageAverage

Mathematical explanation Mathematical explanation Let

N,M and O are integers N, M and O are number of questions - values lie

between 1 - 10, for each level, entered by user

[1,10] ) (Z v2; - 1 = O , Z= 3 Level

[1,10] )(Y v8; - 1 = M , Y= 2 Level

[1,10] )(X v5; - 1 = N , X = 1 Level

OO

MM

NN

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Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)

P,Q and R are preset weights whereP,Q and R are preset weights where P = 3 (Level 1 questions)P = 3 (Level 1 questions) Q = 2 (Level 2 questions)Q = 2 (Level 2 questions) R = 1 (Level 3 questions)R = 1 (Level 3 questions)

WWCC = calculated score obtained from values = calculated score obtained from values

entered by userentered by user

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Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)

WW11, W, W22, W, W33 = W = WCC where where

W1, W2 and W3 are pre-calculated limitsW1, W2 and W3 are pre-calculated limits WW11 = upper limit for functional product = upper limit for functional product

WW22 = upper limit for hybrid product = upper limit for hybrid product

WW33 = upper limit for innovative product = upper limit for innovative product

For W1, XN = YM = ZO = 3

W2, XN = YM = ZO = 7

W3, XN = YM = ZO = 10

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Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)Product Categorization (Continued)

Compare WC with W1, W2 and W3

This helps in product categorization and selection of the correct chain for each product type

Range ProductCategory

Supply Chainutilized

0 – W1 Functional Lean

W1 – W2 Hybrid Hybrid

W2 – W3 Innovative Agile

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Conclusion - SummaryConclusion - SummaryConclusion - SummaryConclusion - Summary

This model may prove to be the panacea This model may prove to be the panacea organizations are looking fororganizations are looking for

It further develops the understanding of supply It further develops the understanding of supply chain managementchain management

Also throws light on other issues, which have Also throws light on other issues, which have not been previously dealt withnot been previously dealt with Companies following a LSC tend to form traditional Companies following a LSC tend to form traditional

alliances as opposed to dynamic alliances (VO)alliances as opposed to dynamic alliances (VO) Example - Exxon Mobil mergerExample - Exxon Mobil merger

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Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)

Companies following HSC also form traditional Companies following HSC also form traditional alliances. They may form VO in areas other than alliances. They may form VO in areas other than their core competencies (for producing ‘B’ and ‘C’ their core competencies (for producing ‘B’ and ‘C’ class components)class components) Example - Daimler Benz and ChryslerExample - Daimler Benz and Chrysler

Companies utilizing ASC form VO. Constant need Companies utilizing ASC form VO. Constant need for innovation is the driving forcefor innovation is the driving force Example - Projects involving IBM and Sun Microsystems Example - Projects involving IBM and Sun Microsystems

(IBM1999a), AT&T and Microsoft(IBM1999a), AT&T and Microsoft

Hopefully these new points raised are worth Hopefully these new points raised are worth pondering upon and lead to further researchpondering upon and lead to further research

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Conclusion - ContributionsConclusion - ContributionsConclusion - ContributionsConclusion - Contributions

It focuses on It focuses on the current supply chain types, lean and agile. It combines the two paradigms to introduce a third type of supply chain: hybrid. It clearly defines and differentiates between the three types of supply chains.

It logically associates product types; standard, hybrid or innovative to the lean, hybrid and agile supply chains respectively.

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Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)

By By utilizing the classic product life cycle model, it explains the different requirements for each of the 4 life cycle stages of the product.

In order to provide guidelines to organizations for supply chain selection, it develops another model, which consists of product categorization on the basis of a questionnaire.

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Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)Conclusion (Continued)

A A software tool has been developed to aid in product categorization. On product categorization, the model provides guidelines on the adoption of the correct supply chain.

The thesis focuses on questions, which previously have not been raised. It opens up areas for future research in SCM.

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Conclusion - Future ResearchConclusion - Future ResearchConclusion - Future ResearchConclusion - Future Research

The The models introduced are high level models. This thesis deals with a single product

introduced by an organization. The effect of an organization being a member

of several, different supply chains needs to be researched.

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QuestionsQuestionsQuestionsQuestions