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 Strategy
Pull 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 Rubbermaid 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
Board
Printer
Customer
(Europe)
Stage 1
(Europe)
Stage 2 +
Integration (Far East)
Stage 1
(Europe)
Board
Printer
Stage 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 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