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Postponement
How to respond to demands for– Customized products– Rapid delivery– Competitive prices
in the face of short product lifecycles.
The Issues
• To provide rapid delivery need to have – capacity to make to order quickly or– inventory of finished goods
• Capacity means high capital costs
• Inventory is expensive because customization means many skus.
Example
Auto manufacturers could cut 2 weeks out of delivery time by
• building many small assembly plants with capacity to meet regional demand. Why don’t they do this?
• Positioning inventory of finished vehicles closer to the customers. What are the consequences of this?
Other dangers from Inventory
• Extends time to market– Guess what products customers will want– Poor forecasts of demand volumes– Slower to bring new technologies to market– Obsolescence
The Third Way
• Modular design with postponement– Modular design
• reduces the cost of customization
– Postponement• delays the investment in customization
Consequences• Aggregate forecasts for majority of product
• Detailed forecasts are restricted to customization modules
• Investment in customization is delayed so component forecasts are short
• Customization capacity needs are reduced -- limited to adding customization modules not building the entire product
Opportunities
• Move customization closer to customer– What are the tradeoffs?
Apple imac
• 5 Colors. Built to forecast. – Indigo– Ruby– Sage– Graphite– Snow
Compaq
• Special panels user can apply to change color of the computer at home
Milliken Carpet
• Before– Dozen Bases– Several Gun Bars– Change overs from Base to Base– Change overs from Gun Bar to Gun Bar– Down time on expensive printer
Milliken Carpet
• After– 1 (or 2) bases– 1 gun bar– Changeover from one product to next requires
seconds – No down time
What’s Involved
• Product Design
• Manufacturing Process
• Supply chain design
Modular Design
• Standardize Components
• Identify and postpone non-standard ones
• Simultaneous assembly of different modules reduces critical path
• Localize problems and re-design efforts
Power Supply
• Option 1: More expensive supply that can convert voltage
• Example: HP LaserJet– Manufactured in Japan and shipped to the
world.– Change to a versatile power supply saved 5%
on cost to manufacture, stock and deliver
Power Supply• Option 2: More specialized supplies that cannot
convert voltage installed late.
• Example: HP Deskjet– Made in Singapore– Designed with country specific external power
supply– Shipped to Stuttgart
• where power supply is purchased and added• adds manuals and packing material
Consequences
• Higher manufacturing costs
• Bottom line: 25% lower manufacturing, shipping and inventory costs.
• Where did the savings come from?
Trade-offs
• Increased cost of materials and perhaps manufacturing
• Savings in inventory depend on:– Variability and uncertainty in demand– lead time to markets and from suppliers– life cycle– ...
Conflicting Objectives
• Marketing: every possible product option
• R & D: most functionality at lowest cost
• Manufacturing: Few products and stable volumes
• Resolution should be system wide view
Example
• Generic Deskjet for Mac and PC rather than two models– What were the arguments
Manuals and Information
• Printer manuals can be printed in several languages
• Software versions make this even simpler
• Pharmaceutical products require country-specific labels: – dosing info and warnings must be in local language– country specific information– what to do?
Home Depot Paint
Mix and Add the Colors to Order
• What are the benefits and costs?
Re-sequencing
• Traditional Clothing manufacture– Dye the yarn– Knit with the dyed yarn
• Benetton– Knit with grey yarn– Dye the sweaters
• Trade-offs?
Standardization
• HP Disk drives– Add customer-specific driver boards– Test (time consuming)
• Revised process to – Test drive– Insert customer-specific boards– Test board
• Trade-offs?