Tuesday, February 4, 2014

Keep it simple !

Simplicity is the crux of supply chain management and its relationship with new product design and manufacture. Creating a new product requires huge investment and the optimal way of procuring return on investment is by keeping the supply chain process less complicated. In essence, the easier the logistics of the manufacturing process is, the more sustainable the end to end supply chain management process is. The below you tube video of the supply chain management of Puma describes this aspect clearly.


Following points enumerates how simplicity and clarity can affect each phase of supply chain in effect reducing cost and increasing profits:

1)      Clear idea about goal of the new product: While introducing a new product to the market, the entrepreneur should be very clear on why the new product would sell more than its substitutes. The reason could be as simple as marketing the cheapest product in the industry. For example, Tata was clear that Nano would be the cheapest car available in the global market. The first step to a product design for Ikea is to decide the price tag of the new product that its competitors would envy. Thus Ikea’s goal is to produce the ever cheaper product. Once clarity of goal is achieved, other processes and targets can be built upon.
2)      Simplicity in the process of assembling: Tata revamped the process of distribution by outsourcing the process of assembling Tata’s superhit car Nano to local entrepreneurs. Instead of assembling the car in the traditional way in one of its factories, Tata trained independent service people to make customized cars for Nano’s customers. It was a simple idea but a very innovative one which gave Tata one of a kind leverage of making the customer part of the assembling process.

3)      Simplicity in selling: Ikea actually made selling of goods so simple that it literally erased the necessity of a salesperson. Rather, a customer is guided by the layout of the store towards the product required for him. This simplifies the process sales of Ikea’s products.

4)      Simplicity in technology usage: The video on Puma talks about how they reduced the IT related logistics to the usage of just one server and one database. Since investment in information technology is an inevitable component of the supply chain management process of all enterprises, creating an IT infrastructure that is easily maintainable is core to the manufacture of new products.

5)      Fewer business partners: Decreasing the number of distributers, manufacturers and in essence the total number of parties involved in the supply management simplifies the process. This also makes it easier to align the goals and strategies of the involved enterprises. Tata greatly benefited by this strategy.

Benefits of simplicity:

1)      Cost reduction: Decreasing the number of people involved in supply chain management process and simplifying assembling of products cuts the costs dramatically.

2)      Long term benefits: Simple and modular processes of supply chain are easily sustainable and requires less supervision.

3)      Less Risky: Since the number of individual enterprises involved is reduced, there are less chances of failures.

Keeping the manufacturing process simple does not mean that it requires less effort. In fact it needs a lot of planning and out-of-the box thinking.

Global enterprises such as Apple and Ford who have their product materials drawn from various parts of the world find it very difficult to simplify the process. The complexity of the supply chain management process makes it very difficult to direct the strategies of all the enterprises towards the manufacturing of a less expensive product. Additionally, once the forecasting and the complete end to end supply chain process is designed for a new product, it becomes even more difficult to change the process and redo the complete process. Thus, it is necessary that the enterprises build a simple process from start.

Therefore, in total, the best way to manage supply chain in product design is to keep it simple!


Questions:  In cases such as Tata Nano, where independent distributers and assemblers are involved in the manufacture of a car, doesn’t the overall quality of the cars deteriorate. What are the contingency plans in cases that companies such as Tata plan if the local entrepreneurs stop being productive due to some political or social interests?

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