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Delayed Product Differentiation  Increased pressure from market to offer variety  Even in national markets, customers are increasingly asking for different.

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Presentation on theme: "Delayed Product Differentiation  Increased pressure from market to offer variety  Even in national markets, customers are increasingly asking for different."— Presentation transcript:

1 Delayed Product Differentiation  Increased pressure from market to offer variety  Even in national markets, customers are increasingly asking for different designs, functionality, etc  Globalization: different markets may have different requirements for the product, due to differences in taste, language, geography, government regulations  Technology  Multiple versions of the same product being sold at the same time  Production technologies are able to offer variety  Result: Product Proliferation  What is the impact on production/logistics costs?  Setup costs  Inventory holding costs  How 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 boundary  Delayed product differentiation enables reductions in demand uncertainty  Reduced demand uncertainty enables the use of pull systems which may be cost efficient due to economies of scale Push StrategyPull Strategy

3 Tailored Postponement  Do not implement postponement for the portion of demand that is certain  Reductions in processing costs  Implement postponement for only the portion where the demand is uncertain  Reductions in inventory holding/obsolescence costs  Example: Benetton  Option 1: Dye + knit + distribution for a portion of demand  Option 2: Knit + dye + distribution for the rest  Determine the production quantity (dye + knit) in option 1 for each color, determine the production quantity (knit) in option 2

4 Design For Logistics  Product and process design key cost drivers of product cost  Design for manufacturing used design to decrease manufacturing costs  Major supply chain costs include transportation costs, inventory costs, distribution costs

5 Design For Logistics  Design for logistics uses product design to address logistics costs  Key concepts of design for logistics  Economic packaging and transportation  Concurrent/parallel processing  Standardization

6 Economic transportation and storage  Design products so that they can be efficiently packed and stored  Design packaging so that products can be consolidated at cross docking points  Design products to efficiently utilize retail space

7 Examples  Ikea  World’s largest furniture retailer  131 stores in 21 countries  Large stores, centralized manufacturing, compactly and efficiently packed products  Rubbermaid  Clear Classic food containers - designed to fit 14x14” Wal-Mart shelves

8 Concurrent/ Parallel Processing  Objective is to minimize lead times  Achieved by redesigning products so that several manufacturing steps can take place in parallel  Modularity/decoupling is key to implementation  Enables different inventory levels for different parts

9 The Network Printer Example Stage 1 (Europe) Stage 2 + Integration (Far East) Customer (Europe) BoardPrinter Stage 1 (Europe) Integration (Europe) Customer (Europe) Board Printer Plastics, motors, etc. Stage 2 (Far East)

10 Supplier Integration in product development  Competitive forces are driving firms to integrate suppliers into product development  Spectrum of Supplier Integration  None  White Box – Informal integration  Grey Box – Formal integration, with collaborative teams  Black Box – Interface requirements are given, product is returned

11 Supplier Integration  What approach is appropriate?  Determine internal competencies  Determine product development needs  Identify external development and manufacturing needs  If 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 technologies  Follow suppliers that have developed expertise  When appropriate, integrate these new technologies  This 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 Customization  The delivery of a wide variety of customized goods at low cost  The key is modular products and processes, so that customer requests can be met  Companies need to evolve towards “modular companies”, with managers ensuring that modules are compatible.  Needs instant, costless, seamless integration of different modules (components)  Consider National Bicycle  Bikes manufactured based on customer weight, size, selections of model type, color patterns and components  Dell


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