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Delayed Product Differentiation

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  • 1. SE 492: Supply Chain Systems Modeling Delayed Product Differentiation
  • 2. Approaches
    • Standardization
    • Modular Design
    • Process Restructuring
  • 3. 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)
  • 4. Modular design
    • Decomposing the complete product into sub-modules that can be easily assembled together
    • The point of product differentiation is delayed
  • 5. Process restructuring
    • Resequencing process steps in making a product
    • Common process steps are performed before the product specific process steps
  • 6. Model
    • Products 1 and 2 assume their identity after operation k
    • operation
    • buffer
    1 2 k K+1 N N K+1
  • 7.  
  • 8. 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
  • 9. Notation
    • S i : average investment cost per period if operation i became a common operation
    • n i (k) : lead time of operation i when operation k is the last common operation
    • p i (k) : processing cost per unit for operation i when operation k is the last common operation
    • h i (k) : inventory holding cost for holding one unit in inventory at buffer i for one period when operation k is the last common operation
  • 10.
    • 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
  • 11. Model
    • Z(k) : total relevant cost per period for the case when operation k is the last common operation
  • 12. 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
  • 13. PCA FA&T Customization Customization FA&T PCA Customization Standardization of Parts Mono Printer Color Printer color Printer Mono Printer
  • 14. Standardization of components
    • S 1 >> S 2 >0
    • n i (k) = n i for each i
    • β i >= 0 Captures the additional material and processing costs when operation i is standardized
  • 15. Standardization of components
    • β 1 > β 2 > 0
    • b i : captures the cumulative value added at each operation
    • δ i : additional value added at stage i when it is standardized
  • 16. Standardization of components
    • δ 1 >> 0 because the value of the common head driver is high
    • δ 2 ~ 0 easy to standardize
    • We can evaluate Z(0), Z(1), and Z(2)
  • 17. Standardization of components
  • 18. Modular Design
    • Dishwashers in different colors
    • Manufacturing steps
      • Fabrication
      • Integration & Shipping
      • Distribution
    • N=3 k=1
    • Modular design of the metal frame
  • 19. Modular Design of Parts Fabrication Integration +Shipping Distribution Black dishwasher White dishwasher Fabrication Integration +Shipping Distribution + Panel assembly Black dishwasher White dishwasher After modular design of the metal frame
  • 20. Process restructuring Postponement of Operation
    • Manufacturing & distribution of electronic devices
    • Manufacturing steps
      • Manufacturing of components
      • Bundling of components
      • distribution
    Production center Distribution center
  • 21. 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
  • 22. Process restructuring Reversal of Operations
    • Benetton
    • Sweater making process
      • Dyeing
      • Knitting
      • Distribution
    • N=3, k=0
  • 23. dye knit distribution Process restructuring Reversal of operations knit dye dye distribution distribution Red sweater Blue sweater With delayed product differentiation Red sweater Blue sweater

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