Tuesday, February 4, 2014

Design for Supply Chain and Nine Cutting-edge Strategies

Design for Supply Chain and Nine Cutting-edge Strategies

The product design is one of important factors for a company to excel in today’s competitive market in the world. The readings for this week cover product design for operational effectiveness and the supply and demand in the supply chain. I was deeply touched after having read the article “How IKEA Designs Its Sexy Price Tags”. The article provides the insight of the whole process of product design and its impact on price for IKEA products. This drives my desire to explore more on the Design for Supply Chain (DfSC) and understand more on this part. I accessed the article written by Domin and Wisner titled “Nine cutting-edge strategies that will change the way your company designs new products and transform your supply chain”.

In the Domin and Wisner’s article, the Design for Supply Chain (DfSC) is defined as the process of optimizing the fit between supply chain capabilities and product designs. It is the means of creating product configurations that address infrastructure limitations and use supply chain capabilities as they evolve throughout the life of the product. The organization and companies strive to dominate today’s competitive market environment through use of the supply chain as a competitive weapon to minimize cost but it is not the only way to raise the company to the top of market competition.

The supply chain that can offer the highest performance at the lowest overall cost is rapidly becoming a far more valuable and sustainable differentiator and therefore enables the company to win the competition and provides larger market shares as compared to its rivals. This is comparable to IKEA using the DfSC to design its unique sexy price tags that contribute in the growth of its sales as well as expand its businesses worldwide.

Additionally, Domin and Wisner’s article pointed out that DfSC can be the answer to the question, “How do we stay competitive in an increasingly commoditized market?” and it can also be the next big step in product development at this juncture where the Product Development Team (PDT) are often already overwhelmed with product design considerations. It is pointed out that the examination of the nine key strategies behind DfSC and answering the basic what, where, when, why and how of DfSC, it will enable PDT and ourselves on how to design our products for supply chain efficiency. The nine key strategies are as summarized herewith:

1. Optimize Levels of Product Integration: PDTs should determine the optimal level of integration, or parts, that have been pre-assembled at an upstream supplier.
2. Leverage Industry Standards: Use industry standard parts unless proprietary parts are justified to create a competitive advantage
3. Minimize Premium Freight: Premium freight and resources to expedite supply can often compose a large portion of supply chain costs.
4. Design for Life Cycle: Product should be designed to be supply chain friendly to potential component or infrastructure changes through its lifecycle.
5. Configure the selected Supply Chain: The role of a cross-functional product development team should include selecting and configuring the supply chain, but not creating one.
6. Design for Demand & Supply Planning: Designs that leverage DfSC techniques include commonality, modular design, universal function and postponement "pool demand" requirements.
7. Minimize Inventory Costs: The two key inventory costs to consider are carrying costs and obsolescence risk.
8. Optimize Order Management: Product design should consider the facilitation of order management and customer fulfillment.
9. Minimize Warranty/Service Costs: Warranty costs are minimized by a reliable, high quality product with easy to diagnose faults and customer replaceable parts that have a high warranty redemption value.
Furthermore, I explored on a study of design process by Design Council of United Kingdom. The Design Council researched on the whole supply design process in eleven world-leading companies: Alessi; BSkyB; BT; LEGO; Microsoft; Sony; Starbucks; Virgin Atlantic Airways; Whirlpool; Xerox; and Yahoo! The scope of the study covered a wide-area of supply chain design. I was particularly interested on the study on the use of design as a competitive weapon.
The study on the use of design for supply chain a competitive weapon addressed why some world-leading companies think it is worthwhile to invest so much of their resources and efforts managing and optimizing their design process. The responses from these companies show that the design can be used as tool to improve many product characteristics and the other aspects of the business. The design has helped many of these eleven companies respond better to common business challenges:
      I.         Good design makes products more competitive. It keeps production costs down but allows higher prices in the shops;
    II.          Good design keeps users happy, making them come back again and encouraging them to recommend things to their friends;
  III.         Design applies the power of the brand. A strong brand identity encourages customers to trust existing products and to try new ones.
The design for supply chain plays a paramount role fundamental role in the triumph of most world-leading companies. The important thing to note is how the company effectively uses the supply chain as a tool that brings to the company the flexibility in providing the best products and services at the lowest cost and distinguishes itself against the competitors in the same industry.


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