6 Computer Example Wacker Siltronic makes silicon wafers: buy sand grow into long crystalsslice into thin wafers
7 Chip Production Chip burned in a $2b “wafer fab” Wafer cut into chips and “packaged”
8 CD Drive Chip stuffed onto board by Flextronics, Celestica, etc. CD drive assembled by separate contract manufacturerGreen Printed Circuit Board from different supplierCD drive, with a brand name on it, sold to Gateway
10 Supply Chain Design Demand Uncertainty Supply Uncert. EfficientRisk-HedgingResponsiveAgileLowHighLow (stable)High (evolving)SupplyUncert.Efficient – economies of scale.TP, toothpaste, landlines, routersResponsive – Changing consumer needs, mass customization, build-to-orderComputers, fashion apparelRisk-Hedging – pooled resources, multiple sources of supply, more inv., share inv., need good ITServer parts, some ag products, powerAgile – responsive to changing needs, pooled resources: Foxconn/Apple
11 Mass CustomizationDell perfected: exactly what you want, how you want, cheaper than off the shelfHighly customizedIntegrate design, processes, supply networkSupply components cheaply to production pointsFast, responsive production, quick deliveryHigher value, lower weight
12 Managing the Supply Chain Postponement -- withhold any modification until as long as possible. Keep product generic “vanilla”HPBenettonHome Depot paint departmentChannel Assembly -- have distributor assemble products from components
13 HP Inkjet PrintersPrinters made in Vancouver, sent via ship through Panama Canal to EuropeEurope warehouse stocks inventory by countryphysically different-- power supplymanuals different languagesSubstitution not allowedRe-supply time very long
14 Euro Plugs No standardized power supplies for Europe Different power supply for every country.
15 HP Inkjet PrintersRedesigned printers so that power supply added in EuropeRe-engineer product, power supplyAssembly done in a warehouse (Quality?)Manuals added in EuropeMany expensive changesStore ‘vanilla’ boxesPostpone point of differentiation25% cost reduction
17 Benetton Sweaters of undyed wool, dyed once demand is known Dyeing LT much faster than productionHow many undyed sweaters to make?How many Red, Green, Blue, also, if this production process is cheaper, and you know you’ll sell some minimum amount?
18 Behr Paints Small # of bases Small # tints Unlimited # combinations Keep stock colors on hand?How many gallons?Which ones?Lower labor costsHigher inventory costs
19 Modular ComponentsTake advantage of modules: parts or products previously preparedRestaurants: prepared ingredients, assembled to orderSuppliers can develop new, interesting products to use more quickly, cheaplyVariety is gained by different combinations of same components
20 Summary What’s a Supply Chain? Supply Chain design: Mass Customization Examples: Saturn, computer chipsSupply Chain design:Efficient, Responsive, Risk-Hedging, AgileMass CustomizationPostponementHP, Benetton, Home Depot paintChannel assembly