delayed product differentiation

SE 492: Supply Chain Systems ModelingSE 492: Supply Chain Systems Modeling

Delayed Product DifferentiationDelayed Product Differentiation

Approaches

Standardization Modular Design Process Restructuring

Standardization

Using common components or processes

Reduces the complexity of the manufacturing system

Increases the flexibility of use of the WIP and improves the service level of the system (risk pooling)

Modular design

Decomposing the complete product into sub-modules that can be easily assembled together

The point of product differentiation is delayed

Process restructuring

Resequencing process steps in making a product

Common process steps are performed before the product specific process steps

ModelProducts 1 and 2 assume their identity after operation k

operation

buffer

1 2 k

K+1

N

N

K+1

decreases as decreases and any for

2)]()([

))(),((

))((

))((

122112

2221

212112

2121

2

tDtDVar

tDtDCov

tDVar

tDE

ii

ii

Assumptions Sufficient buffer inventories so that the

entire system can be decoupled onto N single-stage systems

Safety stock at each buffer is replenished according to an order-up-to level policy

Service levels for different buffers are the same

Quality at each stage is nor affected by delayed product dofferentiation

Notation Si : average investment cost per period if

operation i became a common operation ni(k) : lead time of operation i when operation k

is the last common operation pi(k) : processing cost per unit for operation i

when operation k is the last common operation hi(k) : inventory holding cost for holding one

unit in inventory at buffer i for one period when operation k is the last common operation

Let z be the safety factor associated with the service level at each buffer.

Each buffer faces normal demand with mean

µ and standard deviation σ Average on-order inventory is nµ and the average buffer inventory is µ/2 + z

σ(n+1)1/2

n: lead time of this stage

Model

Z(k) : total relevant cost per period for the case when operation k is the last common operation

1)()(2

)(

1)(2

)(

)])(()[())(()(

2121

1

1221

1

211

2111

knzkh

knzkh

knkhkpSkZ

i

N

kii

i

k

ii

i

N

ii

N

ii

k

ii

Standardization Computer manufacturer that

manufactures two types of printers Mono printers Color printers

Major manufacturing steps Printed circuit board assembly (PCA) Final assembly and test (FA&T) Final customization

N=3 k=0 Standardize PCA or both PCA and FA&T

Mono Printer

Color Printer

PCA FA&T Customization

color Printer

Mono Printer

Customization

FA&TPCA

Customization

Standardization of Parts

Standardization of components

S1 >> S2 >0 ni(k) = ni for each i

βi >= 0 Captures the additional material and processing costs when operation i is standardized

1 and if )(

1 and if )(

0 when allfor )(

i

kkipkp

kkipkp

kipkp

ii

ii

ii

Standardization of components β1 > β2 > 0

bi : captures the cumulative value added at each operation

δi : additional value added at stage i when it is standardized

1 and if ) ( )(

1 and if ) ()(

0 when allfor )(

k21

i21

kkibkh

kkibkh

kibkh

ii

ii

ii

Standardization of components

δ1 >> 0 because the value of the common

head driver is high

δ2 ~ 0 easy to standardize

We can evaluate Z(0), Z(1), and Z(2)

Standardization of components

)()(1

11)(

)(

23)()0()1(

21112112

32211

3

1211

2112111

bbnz

nnz

n

SZZ

ii

Modular Design Dishwashers in different colors Manufacturing steps

Fabrication Integration & Shipping Distribution

N=3 k=1 Modular design of the metal frame

Modular Design of Parts

Fabrication

Integration

+Shipping

Distribution

Black dishwasher

White dishwasher

FabricationIntegration

+ShippingDistribution

+ Panel assembly

Black dishwasher

White dishwasher

After modular design of the metal frame

Process restructuringPostponement of Operation

Manufacturing & distribution of electronic devices

Manufacturing steps Manufacturing of components Bundling of components distribution

Production

centerDistribution center

Process restructuring

Postponement of Operation

Component

Mfg

Bundling

+Shipping

Distribution

Device A

Device B

Shipping

Bundling

+ Distribution

Device A

Device B

After delayed product differentiation

Component

Mfg

Process restructuringReversal of Operations

Benetton Sweater making process

Dyeing Knitting Distribution

N=3, k=0

Red sweater

Blue sweater

dye knit distribution

Process restructuring

Reversal of operations

knit

dye

dye

distribution

distribution

Red sweater

Blue sweater

With delayed product differentiation