Logistics Challenge of Customisation Janny Leung Systems Engineering & Engineering Management Department The Chinese University of Hong Kong

The Evolution of Marketing The new 4 P's' Product -the essence of what we offer the customer Processes -system and activities that support provision of the core product or services Performance -do we get it right? Have we live up with our promises? People -interaction with employees: make or break!

Changing Customer Expectations Shortening product life cycles Higher service requirements Global market -- segmentation Product proliferation multi-stage, multi-vendor production global transportation logistics demand cost leadtime

Product variety is increasing Crest toothpaste have 35 options (flavors and package sizes) HP workstations have 500,000 options (RAM cards, video cards, graphic cards, monitors, disk drives, etc..) GM cars have 20,000,000 versions (color, interior combinations, drive train configurations, and option choices) Supply Chain Management -- Christopher Tang

Pitfalls of increasing product variety u Demand may not increase -- (Quelch & Kenny, HBR 1994) u total demand spread over more SKUs u reduced product life cycle u Forecasting nightmare u High manufacturing cost u High inventory cost u Poor availability of product to customers u High product support and service costs u “Mark-down” sales at the end of product life Supply Chain Management -- Christopher Tang

Postponement: A Strategy for managing product variety in Global Market Postponement: Delaying the “point of product differentiation” Two types of postponement Logistic postponement: moving customization point to closer to customers Form postponement: delaying differentiation point by standardizing parts, products and processes Supply Chain Management -- Christopher Tang

HP 公司各種打印機 香港中大 - 清华第三届供应链管理高层经理研修班 香港 2002 年 11 月

HP – Universal Power Supply A new network printer for world-wide distribution 110V and 220V power supply for North American and European markets Long lead time from engine manufacturing (by Japanese partner) to printer customers High regional split forecast error ! Hau Lee

負相關减低波動 負相關負相關 香港中大 - 清华第三届供应链管理高层经理研修班 香港 2002 年 11 月

u Standardization -- Mono/Color Printer Cost -- Additional materials Benefit -- Lower Inv.. and Higher Service Level Mono Printer Color Printer PCA FA&T No Delayed Product Differentiation With Delayed Product Differentiation Customization Mono Printer Color Printer PCA FA&T Customization Form Postponement at HP DeskJet Printers Supply Chain Management -- Christopher Tang

Logistics Postponement: Impact on Distribution System ABC DC 100 ABC = 17

Advantages of Postponement Lower inventory cost Improved product availability (better customer service) Lower burden on forecasting especially during ramp-up and end-of-life Lower reconfiguration costs for trans- shipment Lower obsolescence and write-offs Higher design, manufacturing/material costs

Logistics Challenges to Automotive Industry? Thank you