Thursday, November 10, 2011

Impact of Product Design in Supply Chain

The impact of product design has played a major role in influencing the Supply Chain strategies and decisions pertaining to it. While much focus has been dedicated to the way each entity in supply chain co-ordinates, more often than not, the way the product design is handled and managed, takes a back stage. With Companies realising the importance of a good design, there has been a huge shift in paradigm when it comes to role that design plays in devising thee company’s design strategies. Design is no more just a competitive factor, it also decides the way companies sources its components, choose their production methods and also the way products are shipped and displayed in the retail stores. Companies like IKEA and TATA have made the best of use of intelligent decisions regarding the product design that helped them achieve efficient use of their supply chain as a competitive advantage over the other market players.

When it comes to the design aspect of manufacturing, an interesting debate would be whether to outsource the design or keep it in house. While a lot of companies outsource the design phase due to lack of expertise or cost arbitrage factor, it has its own drawbacks that are tagged with it. The first and foremost consideration is quality. You never know how well the vendor percieves your product. Also, From a strategic standpoint, outsourcing product design might result in incongruence of the design with the products that are made in house. The UK cloth retailer Marks & Spencers which had challenges due to design issues, later bounced back with an in-house design strategy. This idea helped the development team to influence the supply chain both upstream and downstream as sales information and feedback from customers is received. It also allowed the in-house experts to communicate ideas, discuss latest trends and thus the products which were displayed as individual items in the store, later sat as a collection in a store

The extent, to which the company’s design is flexible enough to allow changes that happen later, also plays a major role. Design, tagged with Agility might help companies over the challenges in supply chain management. Integration of design into the supply chain needs to be done in early stages. While effective product design has its own positive influence, it is often a challenge to manufacturers to come up with the right strategy. Consequently the idea of product design needs to be assessed as part of Risk Management Strategies as early as the planning stages.

While the TATA NANO, Marks & Spencers and IKEA cases prove the importance of effective product design’s positive impact on the supply chain management, I am curious to know as to how these organizations plan their designs so well and also how well other similar companies are doing w.r.t design. The questions that come to mind based on the design aspect are how much are companies willing to spend in having a really efficient and agile design? Is in house-design the best way to respond to customer demand or does it depends on the product? How do companies that manufacture electronic goods manage to outsource a lot of parts of their products and still meet the customer demand? What role does design play in their outsourcing decisions.


1. Does product design have an impact on supply chain risk?

2. Supply Chain Risk: Product Design Changes.

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