1. 9. Coordinated Product and SC Design Case: HP Desk-jet Printer Supply Chain (Read pages 167-177) HP-founded in 1939 Electronic test and measurement equipment Computers and peripherals In 1990 ~ 50 operations worldwide, $13.2 billion revenue Peripherals-2nd largest product group among 6 ($ 4.1B) Printers, plotters, disk and tape drives, terminals, network products

2. Printer market (in 1990): dot matrix (40 %), ink-jet (20 %), laser (40 %) Desk-jet activities centered in Vancouver, Washington Although very efficient in manufacturing--- distribution and sales did not closely follow Inventory growth ~ sales growth Although high inventory levels at distribution centers, Europe organization still complained of low customer service –improved service with low inventories –allocating right amounts of inventory

3. The Desk-Jet Supply Chain supplier IC Mfg supplier PCAT supplier Print Mech Mfg FAT US DC European DC Far East DC Customer 1 week 1 day 4-5 weeks

4. Desk-jets in Europe: “localization” –assembling the appropriate power supply module –power cord –manual written in appropriate language –packaging with the printer Product design –assembly of the power supply to be performed as part of the final assembly –therefore, localization at the factory shipped to 3 Distribution Centers by sea Raw material and component inventories at Vancouver No finished goods inventory

5. What drives inventory levels up ? –Competitive printer market –computer stores don’t want to carry inventory with high service level –hence DCs need to carry stock (replenish weekly) –target level at DCs = forecast sales + safety stock –note: that also means high safety stock for material at the plant What is the consequence of long lead-times (from plant to Europe DC) ? –Limited capability to respond fluctuations for different product versions –imbalance of inventories: backorders in some, inventory in others

6. Initially: design a product that works and inexpensive In 1980s: Design for Manufacturing (DFM)--take manufacturing process into account as early as possible Recent paradigm shift: Design for Logistics (DFL)-- product and process design that help to control logistics costs and increase service levels –economic packaging and transportation –concurrent and parallel processing –postponement and delayed differentiation

7. Economic Packaging and Transportation –Ikea example: traditionally furniture sales through small stores---long lead-times for customers –Ikea: warehouse-like stores, 1000s of products by effective “kit” design –Assemble at home –Easy to transport and easy to store

8. Concurrent and Parallel Processing Europe Board Printer Customers (Europe) Board Printer Housing Asia Europe Asia

9. Postponement –recall: aggregate demand information is more reliable –we can have better forecasts for a product family (rather than a specific product or style) –how to make use of aggregate data ? –Designing the product and manufacturing processes so that decisions about which specific product is being manufactured (differentiation) can be delayed until after manufacturing is under way Point of differentiation

10. Delayed Differentiation Strategies Standardization of components and subassemblies: –Related items in a family start out being manufactured from distinct initial subassemblies and components –Standardization is achieved by substituting these by common ones –HP implementation: instead of using 2 versions of power supply unit (110 or 220 volts) using a universal power supply (switchable). HP decreased the total cost by 5 % annually

11. Modular Design: –manufacturing of dishwashers in variety of colors –end-products are differentiated from each other in terms of the metal frames (assembled in “integration and shipping” stage) –painted metal frame replaced by uniform metal frame and a light plastic colored frame –assembly of plastic frame can be postponed until the end of the distribution –hence, original frame is modularized

12. Resequencing: –modifying the order of product manufacturing steps so that the operations resulting in differentiation of specific items are delayed as much as possible –Benetton example –very rapid change in customer preference –dyeing of garment delayed until after sweater is completed –required new investment and training –revised manufacturing is almost 10% more expensive –improved forecasts, lower surplas inventories, increased market share

13. Postponement of operations –One or more differentiating operations can be postponed till a later stage, prolonging the initial phase which precedes the point of differentiation –In HP case product differentiation may be delayed by shipping generic printers from the plant to DCs and by adding the differentiating accessories at the very end of the distribution process

15. 12 k k+1 N N operation buffer

20. PCA FAT Customization Mono printer PCA FAT Customization Color printer PCA FAT Mono printer customization color printer customization

25. Integration and shipping distribution Black dishwasher Integration and shipping distribution white dishwasher Fabrication Integration and shipping Distribution and panel assembly Black dishwasher white dishwasher

31. dye knit distribution Red sweater dye knit distribution Blue sweater knit dye distribution Red sweater Blue sweater