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SE 492: Supply Chain Systems ModelingSE 492: Supply Chain Systems Modeling
Delayed Product DifferentiationDelayed Product Differentiation
Approaches
Standardization Modular Design Process Restructuring
Standardization
Using common components or processes
Reduces the complexity of the manufacturing system
Increases the flexibility of use of the WIP and improves the service level of the system (risk pooling)
Modular design
Decomposing the complete product into sub-modules that can be easily assembled together
The point of product differentiation is delayed
Process restructuring
Resequencing process steps in making a product
Common process steps are performed before the product specific process steps
ModelProducts 1 and 2 assume their identity after operation k
operation
buffer
1 2 k
K+1
N
N
K+1
decreases as decreases and any for
2)]()([
))(),((
))((
))((
122112
2221
212112
2121
2
tDtDVar
tDtDCov
tDVar
tDE
ii
ii
Assumptions Sufficient buffer inventories so that the
entire system can be decoupled onto N single-stage systems
Safety stock at each buffer is replenished according to an order-up-to level policy
Service levels for different buffers are the same
Quality at each stage is nor affected by delayed product dofferentiation
Notation Si : average investment cost per period if
operation i became a common operation ni(k) : lead time of operation i when operation k
is the last common operation pi(k) : processing cost per unit for operation i
when operation k is the last common operation hi(k) : inventory holding cost for holding one
unit in inventory at buffer i for one period when operation k is the last common operation
Let z be the safety factor associated with the service level at each buffer.
Each buffer faces normal demand with mean
µ and standard deviation σ Average on-order inventory is nµ and the average buffer inventory is µ/2 + z
σ(n+1)1/2
n: lead time of this stage
Model
Z(k) : total relevant cost per period for the case when operation k is the last common operation
1)()(2
)(
1)(2
)(
)])(()[())(()(
2121
1
1221
1
211
2111
knzkh
knzkh
knkhkpSkZ
i
N
kii
i
k
ii
i
N
ii
N
ii
k
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Standardization Computer manufacturer that
manufactures two types of printers Mono printers Color printers
Major manufacturing steps Printed circuit board assembly (PCA) Final assembly and test (FA&T) Final customization
N=3 k=0 Standardize PCA or both PCA and FA&T
Mono Printer
Color Printer
PCA FA&T Customization
color Printer
Mono Printer
Customization
FA&TPCA
Customization
Standardization of Parts
Standardization of components
S1 >> S2 >0 ni(k) = ni for each i
βi >= 0 Captures the additional material and processing costs when operation i is standardized
1 and if )(
1 and if )(
0 when allfor )(
i
kkipkp
kkipkp
kipkp
ii
ii
ii
Standardization of components β1 > β2 > 0
bi : captures the cumulative value added at each operation
δi : additional value added at stage i when it is standardized
1 and if ) ( )(
1 and if ) ()(
0 when allfor )(
k21
i21
kkibkh
kkibkh
kibkh
ii
ii
ii
Standardization of components
δ1 >> 0 because the value of the common
head driver is high
δ2 ~ 0 easy to standardize
We can evaluate Z(0), Z(1), and Z(2)
Standardization of components
)()(1
11)(
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23)()0()1(
21112112
32211
3
1211
2112111
bbnz
nnz
n
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Modular Design Dishwashers in different colors Manufacturing steps
Fabrication Integration & Shipping Distribution
N=3 k=1 Modular design of the metal frame
Modular Design of Parts
Fabrication
Integration
+Shipping
Distribution
Black dishwasher
White dishwasher
FabricationIntegration
+ShippingDistribution
+ Panel assembly
Black dishwasher
White dishwasher
After modular design of the metal frame
Process restructuringPostponement of Operation
Manufacturing & distribution of electronic devices
Manufacturing steps Manufacturing of components Bundling of components distribution
Production
centerDistribution center
Process restructuring
Postponement of Operation
Component
Mfg
Bundling
+Shipping
Distribution
Device A
Device B
Shipping
Bundling
+ Distribution
Device A
Device B
After delayed product differentiation
Component
Mfg
Process restructuringReversal of Operations
Benetton Sweater making process
Dyeing Knitting Distribution
N=3, k=0
Red sweater
Blue sweater
dye knit distribution
Process restructuring
Reversal of operations
knit
dye
dye
distribution
distribution
Red sweater
Blue sweater
With delayed product differentiation