Presentation on theme: "Delayed Product Differentiation"— Presentation transcript:
1 Delayed Product Differentiation Increased pressure from market to offer varietyEven in national markets, customers are increasingly asking for different designs, functionality, etcGlobalization: different markets may have different requirements for the product, due to differences in taste, language, geography, government regulationsTechnologyMultiple versions of the same product being sold at the same timeProduction technologies are able to offer varietyResult: Product ProliferationWhat is the impact on production/logistics costs?Setup costsInventory holding costsHow can you still offer variety without increasing your production /logistics costs?
2 Delayed Product Differentiation and Push-Pull Boundary The point of product differentiation is often the push-pull boundaryDelayed product differentiation enables reductions in demand uncertaintyReduced demand uncertainty enables the use of pull systems which may be cost efficient due to economies of scalePush StrategyPull Strategy
3 Tailored Postponement Do not implement postponement for the portion of demand that is certainReductions in processing costsImplement postponement for only the portion where the demand is uncertainReductions in inventory holding/obsolescence costsExample: BenettonOption 1: Dye + knit + distribution for a portion of demandOption 2: Knit + dye + distribution for the restDetermine the production quantity (dye + knit) in option 1 for each color, determine the production quantity (knit) in option 2
4 Design For LogisticsProduct and process design key cost drivers of product costDesign for manufacturing used design to decrease manufacturing costsMajor supply chain costs include transportation costs, inventory costs, distribution costs
5 Design For LogisticsDesign for logistics uses product design to address logistics costsKey concepts of design for logisticsEconomic packaging and transportationConcurrent/parallel processingStandardization
6 Economic transportation and storage Design products so that they can be efficiently packed and storedDesign packaging so that products can be consolidated at cross docking pointsDesign products to efficiently utilize retail space
7 Examples Ikea Rubbermaid World’s largest furniture retailer 131 stores in 21 countriesLarge stores, centralized manufacturing, compactly and efficiently packed productsRubbermaidClear Classic food containers - designed to fit 14x14” Wal-Mart shelves
8 Concurrent/ Parallel Processing Objective is to minimize lead timesAchieved by redesigning products so that several manufacturing steps can take place in parallelModularity/decoupling is key to implementationEnables different inventory levels for different parts
9 The Network Printer Example BoardPrinterCustomer(Europe)Stage 1(Europe)Stage 2 +Integration (Far East)Stage 1(Europe)BoardPrinterStage 2(Far East)Customer(Europe)Integration (Europe)Plastics,motors, etc.
10 Supplier Integration in product development Competitive forces are driving firms to integrate suppliers into product developmentSpectrum of Supplier IntegrationNoneWhite Box – Informal integrationGrey Box – Formal integration, with collaborative teamsBlack Box – Interface requirements are given, product is returned
11 Supplier Integration What approach is appropriate? Determine internal competenciesDetermine product development needsIdentify external development and manufacturing needsIf future products have components that require external expertise and can be separated from other components, a black box approach makes sense.If components cannot be separated, a grey box approach makes sense.If some expertise can be found in house, a white box approach might make sense.
12 The “Bookshelf” Approach Monitor the development of new technologiesFollow suppliers that have developed expertiseWhen appropriate, integrate these new technologiesThis balances the advantages and disadvantages of being on the cutting edge:No need to gain experience with the technology, because suppliers are doing this for you.Can introduce the technologies when needed.
13 Mass CustomizationThe delivery of a wide variety of customized goods at low costThe key is modular products and processes, so that customer requests can be metCompanies need to evolve towards “modular companies”, with managers ensuring that modules are compatible.Needs instant, costless, seamless integration of different modules (components)Consider National BicycleBikes manufactured based on customer weight, size, selections of model type, color patterns and componentsDell