product design

Impact of Product Design Changes on Supply Chain Risk

Daniel Dumke — Mon, 21 May 2012 14:06:24 +0000

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.

Reference:

Lin, Y., & Zhou, L. (2011). The impacts of product design changes on supply chain risk: a case study International Journal of Physical Distribution & Logistics Management, 41 (2), 162-186 DOI: 10.1108/09600031111118549

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product design

Matching Product Architecture with Supply Chain Design

Daniel Dumke — Wed, 19 Oct 2011 15:31:00 +0000

This review is about a preprint article which already has been accepted for publication by the “European Journal of Operational Research”. But since there is only a limited space for articles in each issue of the journal, final publication of the article is delayed.
One could now argue in a general note that this behavior also signifies a delay of the progress of supply chain research over all, with all its negative long term effects. Furthermore, in the days of the internet journals should not limit themselves to an artificial (article) limit, but see only the sky or in this case the number of quality publications as their limit.
But in this case I was able to gain access to an early copy.

Product design & supply chain management

I already wrote several times (1, 2, 3, 4) on how product architecture and supply chain design could be integrated, so this is not really a new topic. But it also touches a more integrative approach of supply chain management.

Building from the early models, where a supply chain could easily be defined by a handful of properties, supply chain models nowadays reach a new level of complexity. One of these extensions is the integration of supply chain activities into the product development process, which is supposed to yield (if we trust case studies like IKEA) enormous benefits in every performance aspect of the supply chain and ultimately the company.In the study reviewed Nepal, Monplaisir and Famuyiwa first develop a conceptual and mathematical model to integrate the supply chain design decisions into the product development process. In a second step this model is then tested using two case studies.

Model

The authors suggest an integrated three step process: 1) selection of product architecture, 2) evaluation of potential suppliers, and 3) optimal configuration of supply chain.

The first step includes the development of a generic bill of materials (GBOM) for every possible product architecture scenario. Figure 1 shows the GBOM for an example Product X.

Figure 1: Generic Bill of Materials for an exemplary product (Nepal et al., 2011)

This product design also leads to a similar generic supply chain structure which is shown in figure 2.

Figure 2: Corresponding Generic Supply Chain for Product X (Nepal et al., 2011)

The second step focusses on the identification and evaluation of available the supply chain participants. Necessary information, like production cost, lead-time and compatibility index has to be collected.
The compatibility index itself is developed by the authors as well and contains information on the compatibility of this potential supplier regarding the structural, managerial and financial dimension. Each of the dimensions is then weighted to generate the complete index. Since the compatibility of the future suppliers is hard to judge before the product is even designed, the authors employ fuzzy logic, allowing them to use ranges for each of the compatibility indices instead of fixed numbers.

The last step aims to find the optimal supply chain configuration. This is done for each product architecture scenario by using a linear goal programming model, where total supply chain cost are minimized while maximizing the compatibility between the partners.

Case studies

There are two case studies, one on bulldozer assembly and manufacturing and the other on an automotive climate control system. I will only talk about the first case since I found it more interesting.

For the case the authors exercise the three steps mentioned above. First they design two different product architectures (integral and modular architectures; figure 3) and the corresponding generic supply chain networks (figure 4).

Figure 3: Case Study: Generic Bill of Materials for Bulldozer Manufacturing (Nepal et al., 2011; click to enlarge)

Figure 4: Case Study: Generic Supply Chain Network for Bulldozer Manufacturing (Nepal et al., 2011; click to enlarge)

Lastly, the authors collect the necessary information of the potential suppliers regarding cost, lead-time and ranges for the compatibility index for two different process options:

Two alternatives are considered for each node. If the node is a procurement stage, the first alternative represents the standard supply option (that is, the existing procurement arrangement). The second option represents a consignment option where the supplier is responsible for providing immediate delivery to the bulldozer line. Similarly, for the assembly node, the first option represents the standard manufacturing method while the second option represents an expedited alternative that corresponds to a supplier who has invested in process improvement efforts in order to decrease its supply lead-time.

After solving the model in the next step, the authors conclude:

In the majority of the bulldozer supply chain stages for a modular architectural design, option two has been selected. While it is more expensive than option one, option two has a lower production lead-time and higher compatibility ratings for all stages because its modularity increases the degree of dependency, based on relative costs of inputs, between supply chain nodes.

Compared with base results, where only supply chain costs are considered, this model delivers a solution which performs (slightly) worse in cost (+0,36%), but on the other hand has the potential to deliver a much more balanced and robust solution considering also compatibility issues.

Conclusion

I found the paper to be a great read and I cannot add anything else to the issues the authors already detected and mentioned in their own conclusion:

Risk factors are missing in the model (e.g. random service times)
Additional factors like sustainability and flexibility should be considered
It is very obvious that this is again a supply oriented model, so it would be great to see how distribution network decisions behave when including product design decisions (since the customers might also change depending on the product design decisions)

Reference:

Nepal, B., Monplaisir, L., & Famuyiwa, O. (2011). Matching Product Architecture with Supply Chain Design European Journal of Operational Research : 10.1016/j.ejor.2011.07.041

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Product design and Inventories - This Week in Supply Chain Management (30 / 2011)

Daniel Dumke — Fri, 29 Jul 2011 10:34:00 +0000

Even though I read a lot of news this week, there wasn’t much supply chain related. But on the bright side this week has brought several great blog posts that I like to share with you.

News

First and last: the Financial Times has aggregated several reports of high inventory of high tech companies and the implications on the supply chains and economies. (FT)

Blog

Dustin Mattison has a nice interview up on his Kinaxis Blog with a procurement manager. They discuss new sources of supply chain risk and driving factors and strategies to mitigate them. (Dustin Mattison)
Richard Faint of the Hull University (UK) summarized some highlights of a meeting with the researchers Omera Khan and Martin Christopher, who’s articles have been covered in this blog here and here, on product design and how it is related to supply chain management. He also shows some of the product design and organizational measures used to keep agility in the supply chain up. (Supply Chain Logistics)
Also have a look at the book review by Jan Husdal on “The Resilient Organization – How Adaptive Cultures Thrive Even when Strategy Fails”. (Jan Husdal)

Conferences

This week I want to highlight two conferences: The first is the “3rd Supply Chain Risk Management Seminar” by Icon Events* on September, 26 & 27 in Barcelona. (Icon Events)
The second: The Supply Chain Council (SCC) features an Executive Summit with the topic “Reinventing Supply Chain Strategy for Performance and Risk”, from September, 28-30 2011 in Palm Springs. I just added it to my conference list of 2011 as well. (SCC)

If you have not read my articles of this week, have a look at the following:

Monday: First up this week was the theme of simplification in Simplified Supply Chain Flows.
Wednesday: Next came a nice article on Simulation as a Tool for Supply Chain Optimization, which brought a great measures for the effectiveness of supply chain simulation.

*) Icon Events is an official partner of the SCRM Blog.

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Combination of Product and Supply Chain Design

Daniel Dumke — Wed, 20 Jul 2011 08:01:00 +0000

In research the decisions on the product and the corresponding supply chain are usually separated. This happens for a variety of reasons, one may be the reduction of problem complexity, another that the research focus is on a brown field approach where the products are seen as given.

This makes this article even more interesting, since it combines the both decisions in one conceptual process and a model to optimize the decision.

Figure 1: Iterative Process for simultaneous Design of the Product and Supply Chain (Lamothe et al., 2006)

Process

The process (figure 1) consists of two major steps. First product variants are developed. In the second step a simultaneous optimization of the supply chain and the product variants is conducted.
The process is meant to be interactive, so that the product designer has the chance to make redesign decisions after step two to learn from the optimization results.
This leads to a generic Bill of Materials (BOM) which contains the different options for the product design alternatives.

Figure 2: Generic Bill of Material for different Markets and Service Requirements (Lamothe et al., 2006)

Model

The authors use a classic Global Supply Chain Model and extend it to consider the generic BOM. The objective is to minimize the total costs (addition of all fixed and variable costs), which is subject to the generic BOM and other constraints (e.g. capacity, shipping, …).

Application

Finally, the authors apply their model at a wiring harness supplier of a car manufacturer. Overall there are 48 possible product families. Using an implementation of their model the authors solve the supply chain optimization and conclude with the result in figure 2.

Figure 3: Resulting Supply Chain after the Optimization (Lamothe et al., 2006)

Conclusion

The idea of the generic Bill of Materials which contains all product variants makes it possible to integrate multiple product variants in the mixed integer linear program.
The algorithm seems to be fast enough to produce optimal solutions within minutes and can therefore be used as a basis for new models integrating other global aspects like taxes and exchange rates.

Reference:

Lamothe, J., Hadjhamou, K., & Aldanondo, M. (2006). An optimization model for selecting a product family and designing its supply chain European Journal of Operational Research, 169 (3), 1030-1047 DOI: 10.1016/j.ejor.2005.02.007

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Decision Support for Supply Chain, Product and Process Design

Daniel Dumke — Wed, 02 Feb 2011 13:46:00 +0000

Many companies are struggling with the idea to use modern optimization techniques to support decision making in strategic supply chain management.

But beside mathematical modeling of the supply chain there are other methods as well, such as network based approaches. In their 2005 paper Blackhurst, Wu and O’Grady present a more intuitive decision support method with the goal to improve decisions within the supply chain context.

Methodology

Figure 1: Example Product Chain Decision Model (Blackhurst et al. 2005)

Complex and dynamic systems like supply chains are hard to understand as a whole. The PCDM (Product Chain Decision Model) uses a network based approach. The network (example see figure 1) therefore consists of different nodes (place nodes: marked by circles and transition nodes: marked by bars). Transition nodes are used for processes, transferring input into output (eg. a transport, production, …), where place nodes are used for components within the supply chain (eg. production facility). The connections are marked by an arrow.

Case Study

Figure 2: Case Study for Chassis Assembly using PCDM (click to enlarge, Blackhurst et al. 2005)

As an example Blackhurst et al. use a case study, where they model the chassis assembly of Rockwell Collins, using actual data of their processes. The result of the status quo can be seen in figure 2. The network presentation is enhanced by the added information, like the lead time (LT) and the reorder point (ROP) at the nodes.

With the help of these networks the authors then optimize the network from the base case with local informations first to an information sharing network. This already helps reducing echelon inventory a lot. The second adjustment is to change raw materials to improve the product and the network even further.

Conclusion

The presented method for improving the supply chain network is intuitive, easy to understand and implement. Yet, it does not seem to be so new, nevertheless, it is a nice addition to the usual supply chain networks to add some key indicators directly at the nodes.
Even though this tool might seem overly simplistic, I really recommend using more tools like these. Many companies do not even analyze their network on a systematic basis, so this looks to be a good starting point for companies which have not used similar tools before.

Reference:

Blackhurst, J., Wu, T., & O’Grady, P. (2005). PCDM: A Decision Support Modeling Methodology for Supply Chain, Product and Process Design Decisions Journal of Operations Management, 23 (3-4), 325-343 DOI: 10.1016/j.jom.2004.05.009

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Personalized Products and their Impact on Supply Chain Design

Daniel Dumke — Wed, 08 Dec 2010 09:41:00 +0000

Experts from research and business alike argue that within the last decades consumers have grown to be a more demanding factor for supply chain management. At the same time manufacturing and supply chain strategies adapted to this development (from lean to agile, see Christopher and Towill, 2000).

But how are customer demands going to develop? Are we already seeing the decentralized manufacturing world, where everybody uses his own 3D printer to produce individual products on their desks? Probably not yet.

But at least for some industries product personalization is one big issues these days. Poulin et al. 2006 analyzes what options companies have to personalize products for their customers and shows the possible effects on supply chain design.

Personalization

From the literature the authors summarize their framework for product personalization. It consists of the following eight options:

Poulin et al., 2006
Personalization Option	Characteristics
Popularizing	Limited number of product to match a wide variety of customer needs, for those who want off-the-shelf products. Focus on evolving the popular product mix in line ith evolving customer needs
Varietizing	Extensive mix of products to satisfy almost all customer needs. Retailers pick those they want to offer off-the-shelf and rely on quick delivery from the distribution network for fast delivery of the others
Accessorizing	A limited set of core products matched with a wide array of accessories. Final assembly of accessorized products performed to order either by the user, the retailer or a fulfillment center
Parametering	Customer defines the desired product through the setting of parameters and the selection of options. He is guided through the specification process. Manufacturing is strictly to order
Tailoring	Product designed/engineered to customer needs. The customer is closely involved in the product realization process
Adjusting	Product adjusted to customer needs after usage. Distributed information systems capture customer feedback
Monitoring	Product is replaced by more adequate product as the customer needs evolve, ensuring continually a best-fit product. This involves regular and interactive customer feedback
Collaborating	Client is viewed as a collaborator with an open dialog. Expert field systems interact with clients, seeking to continually optimize client return

Methodology

To gain insights on the effects on supply chain design the authors conduct a case study in the golf iron industry, where already now a high product variety is a standard. They build a systems model of the industry to improve understanding of the relevant factors and different clients.

After that they describe the deployment of each of the above mentioned personalization options within the industry. For example:

Golf clubs can be parameterized using different coloring
the tailoring option would be used if a customer asks for a different weight distribution in the cavity of an iron head to correct specific, personal miss-hits.
Adjustments would involve the post sale process, where the iron is adjusted to specific needs

Effects on Design

In the following table the effects on supply chain design are listed.

Table 2: Impact of Personalization Options on Demand and Supply Network Processes (click to enlarge, Poulin et al., 2006)

The authors then visualize the effects of the customer involvement and differing decoupling points within the supply chain, effectively generating multiple supply chains for the different customer demands (see figure 1).

Figure 1: Point of Customer Involvement and Decoupling Point of Personalized Offers (click to enlarge, Poulin et al., 2006)

Conclusion

Personalized products are going to be the order winners of the future. The supply chain design has to adapt to these challenges and Poulin et al. gives a good start to change the supply chain accordingly.

Reference:

Poulin, M., Montreuil, B., & Martel, A. (2006). Implications of personalization offers on demand and supply network design: A case from the golf club industry European Journal of Operational Research, 169 (3), 996-1009 DOI: 10.1016/j.ejor.2005.02.005

Christopher, M., & Towill, D. (2000). Supply chain migration from lean and functional to agile and customised Supply Chain Management: An International Journal, 5 (4), 206-213 DOI: 10.1108/13598540010347334

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Leading by Design

Daniel Dumke — Mon, 06 Dec 2010 15:26:00 +0000

Is there consensus about the role of product design as the leading function in the supply chain? Not yet! This article introduces the topic of integrating decisions in product and supply chain design and gives a short glimpse on the “how to implement” part.

Case study

During the last weeks I conducted the following case study on the impact of product design on supply chains using literature and expert interviews, looking for an answer to the basic question: What are the advantages of integrating product design into your supply chain decisions?

European retailer for furniture

Supply chain management starts with the product design. They are using this integration to reduce cost but also carbon emissions. One example, the packaging they use is designed for the specific transportation requirements so that efficiency is raised.
Marks & Spencer, UK
Are using their product design as an integrated part of its overall risk management. Apparel design is also leading procurement decisions (see reference for more information).
Big European food company
Product design is lead my marketing function. Supply chain design is guided by those decisions.

Research

In the literature Khan et al. 2008 also take the view that product design and supply chain design should be integrated more to improve overall results. They first state that product design is usually neglected in corporate risk management. To minimize risks the authors recommend to establish “design led procurement” and “design-led risk management” to improve agility, relationships with suppliers, while on the other hand avoiding over dependence.

How To

Fixson (2005) introduces a framework for an integrated decision making of product, process and supply chain decisions. Decisions taken within those three domains depend on six different product characteristics:

Product modularity
Component complexity
Loosely coupled interfaces
Number of components
Product platforms
Component commonality

Product Characteristics Impacting (constraining and enabling) Design Decisions in Product, Process, and Supply Chain Domain (Fixson, 2005)

He argues that the more interfaces exist between product components the higher the complexity not only in the production processes but also within the supply chain design. This framework however can be used as,

a guideline to focus on design decisions critical for the product and company under consideration; [… it can help to] explore the advantages and limitations of various operational strategies for given product architectures [… and] to improve a company’s strategy planning capabilities over time.

Conclusion

From systems theory it should be obvious that integrating decision making should lead to better results than decisions in separate functions. But the mentioned examples are only a skewed sample to emphasize the point: Yes, it makes sense to integrate product development. But the implementation has to be thoroughly planned.

Reference:

Khan, O., Christopher, M., & Burnes, B. (2008). The impact of product design on supply chain risk: a case study International Journal of Physical Distribution & Logistics Management, 38 (5), 412-432 DOI: 10.1108/09600030810882834

Fixson, S. (2005). Product architecture assessment: a tool to link product, process, and supply chain design decisions Journal of Operations Management, 23 (3-4), 345-369 DOI: 10.1016/j.jom.2004.08.006

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