DesignforSupplyChainManagement

1、design for supply chain managementphil kdavid simchi-leviphilip kaminskyedith simchi-levimcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levithe manufacturing environmentrapid changes new products rapidly introduced short, unknown product life cycleshigh variety

2、of productslong production lead timesincreasing storage and transportation costsdifficult to forecast demandmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levithe goals of the manufacturing organizationresponsivenesscompetitive pricingefficiencycustomer servicemcgraw-hill/irwin 2003 simchi-lev

3、i, kaminsky, simchi-leviwhy do these goals conflict?forces for keeping low inventory inventory expensive low salvage valuesforces for keeping high inventory long lead times customer service is important demand is hard to predict reduction in transportation quantitymcgraw-hill/irwin 2003 simchi-levi,

4、 kaminsky, simchi-levidesign for logisticsproduct and process design key cost drivers of product costdesign for manufacturing used design to decrease manufacturing costsmajor supply chain costs include transportation costs, inventory costs, distribution costsmcgraw-hill/irwin 2003 simchi-levi, kamin

5、sky, simchi-levidesign for logisticsdesign for logistics uses product design to address logistics costskey concepts of design for logistics economic packaging and transportation concurrent/parallel processing standardizationmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levieconomic transporta

6、tion 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 spacemcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviexamplesikea worlds largest furnit

7、ure retailer 131 stores in 21 countries large stores, centralized manufacturing, compactly and efficiently packed productsrubbermaid clear classic food containers - designed to fit 14x14” wal-mart shelvesmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviconcurrent/ parallel processingobjectiv

8、e is to minimize lead timesachieved by redesigning products so that several manufacturing steps can take place in parallelmodularity/decoupling is key to implementationenables different inventory levels for different partsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levithe network printer e

9、xamplestage 1(europe)stage 2 +integration (far east)customer(europe)boardprinterstage 1(europe)integration (europe)customer(europe)boardprinterplastics, motors, etc.stage 2(far east)mcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levistandardizationshortening lead times is not always possibleho

10、w else can inventory levels be reduced and forecast accuracy improved?standardization of products and processes product commonality process commonalitymcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levimodularity in product and processmodular product: can be made by appropriately combining the

11、 different modules it 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 form products differ from each other in terms of the subset of operations that are performed

12、on themmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levimodularity in product and processsemiconductor 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 sem

13、i-finished product is difficultmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levimodularity in product and processare modular products always made from modular processes?mcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levimodularity in product and processmodular products are not always m

14、ade 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 ingredientsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levitypes of standardizationpart standardization commo

15、n parts are used across many processes product redesign might be necessaryprocess standardization standardizing as much of the process as possible, making a generic or family product delaying differentiation called “delayed differentiation”, “postponement”mcgraw-hill/irwin 2003 simchi-levi, kaminsky

16、, simchi-levipostponement: exampledemand for black t-shirts 50% probability 100 50% probability 200same for white t-shirtsproduction alternativesproduce 150 of each color ahead of timeproduce 300 which can be dyed after demand is observedmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levipostp

17、onement: examplefirst alternative 25% probability - short 50 of each 25% probability - extra 50 of each 50% probability - short 50 of one, extra 50 of the othersecond alternative 25% probability - short 50 of each 25% probability - extra 50 of each 50% probability - no shortage or extramcgraw-hill/i

18、rwin 2003 simchi-levi, kaminsky, simchi-levipostponement: key conceptsdelay differentiation of products in the same family as late as possibleenables the use of aggregate forecastsenables the delay of detailed forecastsreduces scrapped or obsolete inventory, increases customer servicemay require new

19、 processes or product design with associated costsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levipostponement considerationstradeoff increased product cost with decreased inventoryneed to decide where to postpone - the push-pull boundaryposition in product lifecycle is factor in postponeme

20、nt strategiesinventory value may increaseconsider tariffs and dutiesmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levihewlett-packard: laserjetslaserjets are manufactured in japanpreviously, the printers had two different power supplies (110, 220 volts)differentiation had to happen immediatel

21、yan improved design enables a single power supply to work for both voltages.5% cost savingsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levihewlett-packard disk drivesmanufacturing process redesignhps disk drive division supplied several customerscustomer 1customer 2customer 3pcb insertionte

22、stscustomer 1customer 2customer 3pcb insertiontestscouponinsertioncommon testspcb insertion postponedmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenetton backgrounda world leader in knitwearmassive volume, many storeslogistics large, flexible production network many independent subcontr

23、actors subcontractors responsible for product movementretailers many, small stores with limited storagemcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenetton supply cycleprimary collection in stores in january final designs in march of previous year store owners place firm orders through

24、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 salesmini collection based on customer requests designed in january for spring salesto refill hot selling items late orders as items sell out delivery pro

25、mised in less than five weeksmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenetton flexibilitybusiness goals increase sales of fashion items continue to expand sales network minimize costsflexibility important in achieving these goals hard to predict what items, colors, etc. will sell cu

26、stomers make requests once items are in stores small stores may need frequent replenishmentsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviit is hard to be flexible when.lead times are longretailers are committed to purchasing early orderspurchasing plans for raw materials are based upon e

27、xtrapolating from 10% of the ordersmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenettonold manufacturing processspin or purchase yarndye yarnfinish yarnmanufacture garment partsjoin partsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenettonnew manufacturing processspin or pu

28、rchase yarnmanufacture garment partsjoin partsdye garmentfinish garmentthis step is postponedmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levibenetton postponementwhy the change? the change enables benetton to start manufacturing before color choices are madewhat does the change result in? d

29、elayed forecasts of specific colors still use aggregate forecasts to start manufacturing early react to customer demand and suggestionsissues with postponement costs are 10% higher for manufacturing new processes had to be developed new equipment had to be purchasedmcgraw-hill/irwin 2003 simchi-levi

30、, kaminsky, simchi-leviprocurement standardizationconsider 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

31、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 productsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviproduct standardizationdownward sub

32、stitution 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 ?mcgraw-hill/irwin

33、2003 simchi-levi, kaminsky, simchi-levia framework for standardizationmodularnon-modularnon-modular modularleverage equipment and partcommonality across productscarry a limited number of products in inventorymaximize component commonality across productsdelay customization as late as possiblemcgraw-

34、hill/irwin 2003 simchi-levi, kaminsky, simchi-levihp deskjet case: backgroundhigh volume, high speed manufacturing in vancouvermany different models, all completed in vancouverthree distribution centers north american asian europeanmanufacturing time one weektransportation lead times: europe: 4-5 we

35、eks us at distribution centers, simple standardized processmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levihp deskjet case: analysisproblems high inventory levels inventory imbalance in europecauses uncertainty about correct inventory levels many geographic options (localization) long lead

36、times uncertain market difficulty at getting divisions to work togetherwhat are hps options?mcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levihp deskjet case: optionsshort term rationalize safety stocklong term air shipment european factory more inventory better forecasting dc localizationmcg

37、raw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levisafety stock rationalization:example europe abrecall: safety stock = z std * ltmean weekly demand3656monthly / 4.33std. dev2703monthly/(4.33).5lead time5std. dev of demandperiod60442703*(5).5safety factor1.998% servicesafety stock114831.9*6044mcg

38、raw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levievaluating alternativesair shipment expensiveeuropean factory not sufficient volumebetter forecasting how?more inventory more problemsdc localization what will savings be?mcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levievaluating dc loca

39、lizationin dc localization, risk pooling can be used to reduce 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 evaluatedmcgraw-hill/irwin 20

40、03 simchi-levi, kaminsky, simchi-levievaluating dc localizationavgstdsafetystockweeksof ssa4232666.75aa4202044164.25a4843.11aq2301116923954.48au4208220545174.62ay3071032112.96total23109190893.55generic 231096244127922.38mcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levidc localiz

41、ationsafety stock reduction current 19,089 units (3.55 weeks) with localization 12,792 units (2.4 weeks)other benefits lower value of transit inventory freight reductions local presence of “manufacturing” customs implications local procurement of localization materialsbut there are costs product red

42、esign dc modificationsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviimplementationr&d support “the product is working, so why bother?”dc support “not our core competency”new packagingcapital investmentmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-leviresultssuccessful implement

43、ationmillions savedservice levels increasedpackaging won awardsbest practice spread to other hp divisionsmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levisupplier integrationcompetitive forces are driving firms to integrate suppliers into product developmentspectrum of supplier integration n

44、one white box informal integration grey box formal integration, with collaborative teams black box interface requirements are given, product is returnedmcgraw-hill/irwin 2003 simchi-levi, kaminsky, simchi-levisupplier integrationwhat approach is appropriate? determine internal competencies determine product development n