Delayed Product Differentiation
- 1. SE 492: Supply Chain Systems Modeling Delayed Product Differentiation
- 2. Approaches Standardization Modular Design Process Restructuring
- 3. 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)
- 4. Modular design Decomposing the complete product into sub-modules that can be easily assembled together The point of product differentiation is delayed
- 5. Process restructuring Resequencing process steps in making a product Common process steps are performed before the product specific process steps
- 6. Model Products 1 and 2 assume their identity after operation k operation buffer 1 2 k K+1 N N K+1
- 8. 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
- 9. Notation S i : average investment cost per period if operation i became a common operation n i (k) : lead time of operation i when operation k is the last common operation p i (k) : processing cost per unit for operation i when operation k is the last common operation h i (k) : inventory holding cost for holding one unit in inventory at buffer i for one period when operation k is the last common operation
- 10. 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
- 11. Model Z(k) : total relevant cost per period for the case when operation k is the last common operation
- 12. 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
- 13. PCA FA&T Customization Customization FA&T PCA Customization Standardization of Parts Mono Printer Color Printer color Printer Mono Printer
- 14. Standardization of components S 1 >> S 2 >0 n i (k) = n i for each i β i >= 0 Captures the additional material and processing costs when operation i is standardized
- 15. Standardization of components β 1 > β 2 > 0 b i : captures the cumulative value added at each operation δ i : additional value added at stage i when it is standardized
- 16. Standardization of components δ 1 >> 0 because the value of the common head driver is high δ 2 ~ 0 easy to standardize We can evaluate Z(0), Z(1), and Z(2)
- 18. Modular Design Dishwashers in different colors Manufacturing steps Fabrication Integration & Shipping Distribution N=3 k=1 Modular design of the metal frame
- 19. Modular Design of Parts Fabrication Integration +Shipping Distribution Black dishwasher White dishwasher Fabrication Integration +Shipping Distribution + Panel assembly Black dishwasher White dishwasher After modular design of the metal frame
- 20. Process restructuring Postponement of Operation Manufacturing & distribution of electronic devices Manufacturing steps Manufacturing of components Bundling of components distribution Production center Distribution center
- 21. 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
- 22. Process restructuring Reversal of Operations Benetton Sweater making process Dyeing Knitting Distribution N=3, k=0
- 23. dye knit distribution Process restructuring Reversal of operations knit dye dye distribution distribution Red sweater Blue sweater With delayed product differentiation Red sweater Blue sweater