Coordinated Product

Designing & Managing The Supply Chain Chapter 9

Jay Kang
arrival123@gmail.com

CASE: HP - DeskJet Printer Supply Chain Introduction Hewlett-Packard was founded in 1939 with headquarters in Palo Alto, California Hewlett-Packard introduced the DeskJet Printer in 1988 and it had become one of HPs most successful products. Inventory growth has tracked sales growth closely European branches state that inventory levels needed to be raised even further to maintain satisfactory product availability

CASE: HP - DeskJet Printer Supply Chain Meet customer needs with less inventory Find the best way to satisfy customer needs in terms of product availability while minimizing inventory Arrange an agreement among the various parties that they had the right level of inventory European Distribution Center shows a dip in product availability level, but loads of DeskJets had been shipped to Europe in the past months and European DC was telling Vancouver that is had run out of space its products

CASE: HP - DeskJet Printer Supply Chain The Retail Printer Market In 1990, worldwide sales of personal printers were 17 million units, amounting to $10 billion Sales fueled as customers discovered the superior quality of the Ink Jet printers More and more sales through superstores such as Kmart and Price Club The Vancouver division and its quest for zero inventory Established in 1979 to consolidated personal printer activities from four divisions to the Vancouver site Vancouver introduces kanban process and converts the factory to stockless production just-in-time

CASE: HP - DeskJet Printer Supply Chain The DeskJet Supply Chain Manufacturing done by Vancouver, two key stages:
Printed circuit board assembly and test (PCAT) Final assembly and test (FAT)

Localization is the process of meeting the required customization of the printer to meet language and power supply requirements of the local countries Total factory cycle time though the PCAT and FAT stages was about a week
Transportation time to the US was a day Transportation time to Europe and Asia was four to five weeks

CASE: HP - DeskJet Printer Supply Chain The Distribution Process DeskJet printers are a high-volume product and the major performance measures for a typical DC included line item fill rate (LIFR) and order fill rate (OFR). DC had four simple, straight-line process steps:
Receive (complete) products from various suppliers and stock them Pick the various products needed to fill a customer order Shrink-wrap the complete order and label it Ship the order by the appropriate carrier

Design For Logistics

Concept of product and process design to help control logistics cost and increase customer service levels Economic packaging and transportation Concurrent and parallel processing Standardization

Economic packaging and transportation

Design products efficiently packed and stored to produce the minimal amount of space allocation
Products that can be stored more compactly can be transported less expensively Retailer favor products that take less storage space and stack easily

Advantages of Superior Packaging

Reduces inventory cost by decreasing the handling cost Space per product (rent per product) decreases Revenue per square foot can increase

Concurrent and Parallel Processing

Modifying the product design and manufacturing process
Reduce lead time Lower inventory cost through better forecasting Reduce safety stock requirements

Decoupling: A key concept for keeping the manufacturing process parallel

Able to design different inventory strategies for the various decoupled components Higher inventory level can be held for signal component

Standardization
Effective use of aggregated demand information to yield better forecast outcome:
Delay decision for specific product manufacturing until the purchase decision has been made Decision based on aggregated level, insuring a more accurate aggregated forecast

Professor Swaminathans standardization framework

A Modular Product: Product assembled from various modules such that for each module there are a number of options A Modular Process: A process of discrete operations so that inventory can be stored in partially manufactured forms between operations

Standardization
Swaminathan identifies four different approaches to standardization:
Part Standardization: Uses of common parts across multiple product lines Process Standardization: Standardizing as much of the process as possible for different products and then customizing the products as late as possible
In some cases resequencing and commonality allows the final manufacturing steps to be completed at the distribution center

Product Standardization: A large variety of products may be offered, but only a few kept in inventory
Downward substitution: An order is filled by a product that offers a superset of the feature required by a customer

Procurement Standardization: Involves standardizing process equipment and approaches, even when the product itself is no standardized

Selecting a Standardization Stragety

The firms success rate of standardization is based on its ability to modularize its product and processes Important Considerations
The various strategies are designed to deal with inaccurate forecasts and product variety It may not be possible or cost effective to implement these strategies in the context of a particular product or a specific supply chain
Value of these types of changes is higher at the start of the product life cycle Customizing the products as late as possible, the per unit cost of inventory will rise Some cases, semifinished products pay lower tariffs

The Push-Pull Boundary

In push-based system, the production decisions are based on long-term forecasts, while the pull-based supply chains, production is demand driven Pull-based system typically lead to reduction in supply chain lead time, inventory levels and system cost, and easier to manage system resources Push-pull boundary: the point where the system changes from push-based system to a pull-based system
Example) Sweaters remain uncolored and are dyed to meet customer demand

Case Analysis
The lead time is around four to five weeks from its product ion facility in Vancouver to Europe

HP is concerned with high inventory levels and inventory imbalance in European Distribution center
Localization is done in Vancouver many weeks before the products arrive in Europe European DC often find that it has too much inventory of printers customized for certain markets, and not enough inventory of printers customized for others

To address this for the long term the following solutions were proposed:
Switch to air shipments of printers from Vancouver Build a European factory Hold more inventory at the European DC Improve forecasting practices

Case Analysis
An alternative option is Process Standardization (postponement)
Ship unlocalized printers to the European DC and localizing them after observing local demand

Calculate required safety stock for each of the customized products

Lead time is five weeks Require a 98 percent service level

HP needs over three-and-a-half weeks of safety stock on hand European DC only keeps safety stock of generic printers, customizing the printers as demand is realized

The Spectrum of Supplier Integration

Develop the notion that a spectrum of supplier integration is used and that there is no single appropriate level of supplier integration
None: The supplier is not involved in design. Material and subassemblies are supplied according to customer specification and design White Box: This level of integration is informal. The buyers consults with the supplier informally when designing products and specifications, although there is no formal collaboration Grey Box: This represents formal supplier integration. Collaborative teams are formed between the buyer's and the suppliers engineers, and joint development occurs Black Box: The buyer gives the supplier at set of interface requirements and the suppliers independently design and develops the required components

Keys to Effective Supplier Integration

To achieve an effective supplier integration, hard work has to be undertaken for the relationship to be a success Select suppliers and build relationships with them Align objective with selected suppliers

What is Mass Customization

Mass customization has evolved from two prevailing manufacturing paradigms
Craft Production: Highly skilled and flexible workers, who governed by personal or procession standards, and motivated by the desire to create unique and interesting products or services Mass Production: Efficient production of large quantity of a small variety of goods

Mass customization captures many of the advantages of both the mass production and craft production
Delivery of a wide variety of customized goods or service quickly and efficiently at lost cost

Making Mass Customization Work

The key to making mass customization work is highly skilled and autonomous workers, processes, and modular units
A modules success depends on how effectively, quickly and efficiently it completes its task and how good it is at expanding its capabilities Managers determine these link between modules fit together harmoniously in different links between modules to meet customer requests

Making Mass Customization Work

There are several key attributes that a system within a company that links different modules must possess Instantaneousness Costless Seamless Frictionless