Impact of Product Design Changes on Supply Chain Risk

In theory supply chains look really nice. Some even have a serial structure with three or sometimes even only two participants.

Almost any complication to this basic theme is still the focus ongoing research, especially if risks are involved.

Concept

So this study focusses on the effects of requests to change the product design on the risk environment of the supply chain.

The core questions are:

• RQ1. Why do certain supply chain risks occur following design change requests from customers?

• RQ2. How do customer design changes affect supply chain risk?

Figure 1 shows the concept behind these questions. The product design change is triggered by the customer. This has effects on the supply and demand side equally and induce risks within the company and supply chain.

Figure 1: Research Concept (Lin and Zhou, 2011)

Method

This study uses a case study approach. And this is one of those papers, that I would recommend reading, if you are doing your own case study.

Well, first of all the documentation is really thorough and comprehensive, covering many details from one of the core sources for case study research (Yin 2009).

Secondly, it seems that execution is equally exhaustive.

Figure 2 shows the three case studies covering different supply chains for special purpose vehicles (SPV). In the lower part some of the properties of the participating companies are detailed.

Figure 2: Characteristics of the Case Companies (Lin and Zhou, 2011)

Within each company several interviews were conducted. 20 of them more in-depth, with up to six hour of length, and another 40 shorter/focused interviews.

Of course, an interview question guideline was used to steer the interviews and several other sources were taped to support the data gathered during the interviews. Namely, secondary documentation (company information, design drafts, process files) and archival document like sales records, customer service records, organizational records.

Finally, the authors go the long way, using several trustworthiness criteria, to constitute the validity of their research.

Results

Sometimes in research the focus seems to be much more on the methodological foundations than on the results. Well, that is for a reason: since the results should later be used by other researcher to built their own work on, so it is always good to build on a trusted and valid source.

But, as a regular reader you know, that I am at least as interested in the final results.

So, let’s have a look at them.

First, figure 3 shows the process mapping of the SPV supply chain.

Figure 3: Mapping of the Special Purpose Vehicle Supply Chain (Lin and Zhou, 2011)

The double-dotted line shows the specific processes needed to handle the customer requirements with product design change, while the single-dotted lines show the normal process. According to the case studies, the potential risks might occur in several stages marked with a pointed star.

The SPV industry is a highly customized-demand market. In such a market, the SPV manufacturer always faces quickly changing customer demands. The order change rate is 10-15 percent. Most of the demanded changes are related to product design. For example, changing the requirements of the chassis (new brand or new length) and tank volume are the two most common customer requests.

The authors found the following challenges in supply chain operations:

• Lack of design capability
  From the internal view, the most important bottleneck is lack of design capability, so manufacturers carry risk in its ability to redesign the product to meet customer requirements. Even as an important strategic partner of a “top 3” automotive company in China that has received great technical support from the relationship, manufacturer M1 itself still lacks in product design and process engineering.

• Low level of communication
  […] Sometimes the R&D department accepts the product change via the sales department without informing the production department to check whether it has the necessary and available production capacity.

• Supply uncertainty
  Product design change results in changing material and component requirements; thus, a shortage of materials, especially of key components, occurs as a vital risk to the manufacturers M1 and M2.

• Unstable production plan
  Production plans are changed frequently to accommodate the customers’ changed requirements. Correspondingly, production processes must be interrupted to restart and adjust to the new designs. Hence, the pace of the assembly line is unstable, and it is impossible to set up a stable standard production process

• Delivery delay

• Immature regulation and policy

Furthermore, the authors analyze the risks, which were mentioned during the interviews. Figure 4 summarizes the causes and effects of different risks and mitigation approaches.

Figure 4: Cause and Effects of Supply Chain Risks after Product Design Changes (click to zoom; Lin and Zhou, 2011)

The following core risks are affected by product design changes:

• Internal risk dimension

• R&D risk

• Production risk

• Planning risk

• Information risk

• Organizational risk

• External risk dimension

• Supply risk

• Delivery risk

• Policy risk

The authors conclude that: “the dynamics of product design have significant impacts on the operations of the whole supply chain, including R&D, production, planning, information, organizational structure, supply, delivery, and policy”

Conclusion

The authors already mention it: This research not only can prove useful for the manufacturer and its suppliers which are affected by the design changes itself. But this can also be useful for the customer itself, which then can estimate and weigh the risks connected to any changes from an original product design.