Integrating Supply Chain and Development Chain 1 Slides 8 Integrating Supply Chain and Development...

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  • Integrating Supply Chain and Development Chain*Slides 8Integrating Supply Chain and Development ChainGlobal Supply Chain Management

    Integrating Supply Chain and Development Chain

  • General FrameworkTwo 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 (design), make/buy decisions, earlier supplier involvement, strategic partnering, supplier footprint and supply contracts.Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Introduction to Supply Chain ManagementSlide *Development and Supply Chain

    Integrating Supply Chain and Development Chain

  • Key QuestionWhat is the appropriate Supply Chain Strategy and Product Design Strategy for each product type? Each product requires a different supply chain strategyEach product requires a different development chain strategyThe two are intertwinedSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Key Supply Chain CharacteristicsDemand uncertainty and variability and alsoEconomies of scale in production and transportationLead time, in particular due to globalizationSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Product structure (modular/integral)Level of modularity or integrality in a productModular productassembled from a variety of moduleseach module may have several optionsBulk of manufacturing can be completed before the selection of modules and assembly into the final product takes placeand also:Technology clock speedSpeed by which technology changes in a particular industryMake/Buy decisionsDecisions on what to make internally and what to buy from outside suppliers

    Development Chain CharacteristicsSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Framework for linking Product Design with Supply Chain StrategyDemand uncertainty & product introduction frequencyRelation to product design & supply chain strategySlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • A. Design for Logistics (DFL)Product and process design that help to control logistics costs and increase service levelsEconomic packaging, transportation and storageConcurrent and parallel processing StandardizationSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Transportation and StorageDesign 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 spaceSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • ExamplesIkea Worlds largest furniture retailerLarge stores, centralized manufacturing, compactly and efficiently packed productsRubbermaidClear Classic food containers - designed to fit 14x14 Wal-Mart shelves

    Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • PackagingDelay packaging until as late as possibleRepackaging at the cross-docking point is common for many productsSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • DFL 2: Concurrent ProcessingObjective is to minimize lead timesAchieved by redesigning products so that several manufacturing steps can take place in parallel (concurrent)Modularity / decoupling is key to implementationEnables different inventory levels for different partsSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Aggregated demand information is more reliable (risk pooling: product, location, time)We can have better forecasts for a product family rather than for a specific product/style How to make use of aggregate data ?Approach: design the product and organize the manufacturing processes so that decisions about which specific product is being manufactured (the differentiation) can be delayed until manufacturing is underwayDFL 3: StandardizationSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Part StandardizationMany common parts used across very different end designs/products (e.g. Toyota). Common parts reduce:inventories due to risk pooling costs due to economies of scaleIt is less risky to keep stock of these parts Warning: excessive part commonality can reduce ability for product differentiationWarning: it may be necessary to redesign product lines or families to achieve commonality

    Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Process StandardizationStandardize as much of the process as possible for different products (flexible production lines)Customize the products as late as possibleDecisions about specific product to be manufactured is delayed until after manufacturing is under wayStarts by making a generic or family productDifferentiate later into a specific end-productThis strategy is also known as Postponement or Delayed Differentiation An option for Modular products (not Integral)Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Delayed DifferentiationMay be necessary to redesign products specifically for delayed differentiationMay be necessary to re-sequence the manufacturing process to take advantage of process standardizationRe-sequencing operations Modifies order of product manufacturing steps (but can involve assembly, distribution: IKEA)can have as result that the differentiation of specific items or products is postponed as much as possible, which helps reduce risks with respect to lead time and uncertainty of demandSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Important ConsiderationsAforementioned changes suggested in strategies may be too expensive to implementCosts related to redesign should be incurred at the beginning of the product life cycleBenefits often cannot be quantifiedincreased flexibility, more efficient customer service, decreased market response timesThrough re-sequencing not only can we address lead time and demand uncertainty:level of inventory usually to go downper unit value of inventory will be higherSlide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Push-Pull BoundaryPull-based systems typically lead to: reduction in inventory levels, in system costs and in lead time (the latter for non-standard products only !) making it easier to manage system resourcesNot always practical to implement a pull-based system throughout the entire supply chainLead times may be too longIt may be necessary (costs) to maintain economies of scale in production, storage or transportation. Standardization strategies (parts and processes) can combine push and pull systems Portion of the supply chain prior to product differentiation is typically a push-based supply chainPortion of the supply chain starting from the time of differentiation is a pull-based supply chain. Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • B. Supplier Integration into New Product DevelopmentTraditionally suppliers have been selected after design of product or componentsHowever, firms often realize tremendous benefits from involving suppliers in the design process. Benefits include:a decline in purchased material costsan increase in purchased material qualitya decline in development time and cost an increase in final product technology levels. Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Spectrum of Supplier IntegrationNone Supplier is not involved in design. Later the materials/half-products to be supplied as per customer specifications/design White boxInformal level of integration. Buyer consults with the supplier informally when designing products and specifications. No formal collaborationUsed when buyer has some design expertise but wants to ensure that supplier can adequately manufacture the componentGrey boxFormal supplier integration. Collaborative teams between buyers and suppliers engineers. Joint developmentUsed when separation is not possible.Black boxBuyer gives the supplier a set of interface requirements. Supplier independently designs and develops the required component.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.

    Slide *Integrating Supply Chain and Development Chain

    Integrating Supply Chain and Development Chain

  • Keys to Supplier IntegrationMaking the relationship a success:Select suppliers and build relationships with themAlign objectives with selected suppliersWhich suppliers can be integrated?Capability to participate in the design processWillingness to participate in the design process and ability to reach agreements on intellectual property and confidentiality issuesAbility to commit sufficient personnel and time to the process, co-locating personnel if appropriateSufficient suppliers resources to commit to the supplier integration process.Commitment