Tuesday, March 4, 2014

Product Designing – Impact on SCM

A lot of effort goes in before a product hits the market!!
There is always a minimum expectation from a product and then there is always a question that what “out-of-the-box” could the manufacturer provide. The success of every new product launched depends on these two factors: Meeting the minimum requirement and value addition.
At the same time companies are now interested in how to create a product with minimum resource consumption, reducing the dependence on external factors, increasing the reusability and recyclability. If a company can prepare a product that can be prepared from fewer raw material, which can be recycled and reused; brings their actual cost of production down significantly, leverages their sensitivity towards the environment, helps produce at faster rate, increases profitability – these factors can be a driving factor at any time for the success of a company. Product designers consistently strive towards achieving such goals.
Now, look at the bigger picture – How all of these will affect the supply chain management?
Let’s take an example. If a company can precisely define what is the target market for a particular product that they are going to launch? If “Yes” – what would it do to see that the right product is delivered at the right time and the company reap the maximum benefit?
What are the possible measures to achieve so? Let’s start counting.
Set up a plant that is near to the target market: This might look as a huge monetary investment even before the product has entered the market and earned some revenue for the company. But, in long run it is always profitable to stay close to the target market as it cuts down on other expenses that can be significantly high over a period of time. Almost all the companies are now trying to open up their manufacturing unit near the market that they target.
Create a product that requires less raw material: This actually can be tricky but there are myriad of examples where the company has used innovative ideas to prepare products that catch upon the market demand and are profitable to the company given their lower and smoother production cost and process respectively. Lot of companies invest premium in their R&D to come up with such products. This is a “win-win” situation for both consumer and the producer. Bio-plastics, LED based electronics, hybrid cars, houses built from recyclable, pre-fabricated houses are a few to count.
Low Price is in trend: With ever-fluctuating economy, companies want products that do not take a hit for a slow/retarded economic condition. Big giants like TATA and NISSAN have come up with low price cars to tackle middle class consumers and save themselves a chance to keep making money when the market dips. Consumer products that require less investment are in more demand.
Having said that, what are its implications on supply chain management or how the supply chain management can affect the fulfillment of these goals? A company trying to realize these targets must eventually find and design a supply network that is simplistic yet sophisticated.
Arranging Local Suppliers: Companies must find and arrange for local suppliers, given the fact that the cos of procurement can be real low and fast. However, finding out suppliers in the vicinity of the production unit sometimes can be a challenging task.
Products with fewer and cheaper raw material: A raw material that count for the maximum part of a product can be really boon for the manufacturer. The cost of raw material used is determining factor in the final price of the product. Plastic fabrication was one concept that TATA used in “Nano’ cars. It accounted to most of the fabrication, both inner and outer, in the car. This made the procurement process really easy and cheaper. The company could get its supply from fewer suppliers rather than depending on various suppliers for each and every raw material for different part of the car.
New technologies that help: Newer technologies believe in use and reuse of products or parts thereof. Many companies now have a strong channel in place to retrieve the outdated, broken, out-of-order scarp of their products from the market/customers. These no value product when recycled and reused fetch a lot of value to the company.
Undoubtedly, a product design and supply chain management go hand in hand to fetch the final goal for any company.
Reference: Information on public domain on internet.

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