Tuesday, February 25, 2014

Now Hiring!

A robust supply chain is a crucial determinant of effectiveness in any business. Throughout the course we have examined key components of a supply chain, analyzing how they aid companies in achieving efficiency, equip them with mechanisms to respond to market forces and prepare them for externalities.

Building upon these foundations, this week’s articles bring interesting insights on ways supply chains are adapting themselves to changing environmental factors in an effort to stay afloat. But before we delve deeper into these mechanisms let us recap briefly on a couple of these factors.

Rising costs have rattled supply chains from top to bottom. Increased transportation and labor costs, rules, regulations and tariffs have all forced companies to rework their supply chain dynamics.

Network Complexity
Rapidly mushrooming industries have increased the load on existing supply chain networks causing resource bottlenecks and competition for access

Though not under our control, environment can cause considerable disruptions within supply chains bringing about heavy losses especially with the current global layout of supply chains. An earthquake in Japan cannot only hamper production but also increases the transportation time, or a problem at the port can wreck havoc with millions worth of goods stalled.

Consumer tastes
Demand is usually derived from what and how customers want their products. These trends however are always changing over time, from mechanical to automation, from power to efficiency, indifference to environmentally friendly so companies and their supply chains always have to be on their toes.

So lets look at what and how opportunities and challenges are shaping the modern supply chain today.

DIY and Crowd-sourcing

Fierce competition has forced companies to think out of the box in terms of making their products stand out while being affordable. To me, there seems to be an interesting shift going on in-terms of product differentiation. There was a time when people would love to have grab and go stuff, or automated machines to perform tasks for them. Plug and play was the mantra of the day. However, once almost everything jumped the automation bandwagon, the idea seemed to stagnate. Manufacturers sort of ran out of ideas to differentiate their already complex products and here is how they deal with it! They take a step back by integrating customers into the supply chain. People once sick of putting stuff together now relished the idea of do it yourself (DIY). I mean who wouldn’t love self-customized products that are unique and can be showed off. A few examples of the top of my head are customizable Bose headphones, Oakley’s customizable sunglasses, User operated Frozen Yoghurt dispensers. 

Weird however was a company featured in Top Gear this Sunday called “Carrozzeria Touring Superleggera”[1] who have been designing car bodies since the early automotive day where cars were churned out just with an engine, a rudimentary chassis and wheels. They are responsible for the first ever Lamborghini, James Bond’s DB9 as well as a couple of Alphas. Now however they have worked their magic on the recently produced Alpha Romeo 8C turning it into a piece of art. So you get your unique, enhanced version of Alpha delivered to you.

The original Alpha Romeo 8C vs the customized 8C designed by Touring dubbed Disco Volante

Secondly what have IKEA and Tutti-frutti (Froyo) done here? They have added customers to their supply chain. Instead of spending money on having someone put stuff together they have customers pick out the components and then have them transport it themselves. Threadless.com[2] is another great example where the company has switched the creative department back to the customer. So essentially they have eliminated the creative department and all costs associated with it from their supply chain. So it is essentially a win-win situation for both! Companies get to produce goods that the customers have voted on or helped design completely while the customers get their unique product with all the features they want. Companies and customers today are really big on crowd sourcing.

The most striking example in this avenue is Nissan using crowd-sourcing to come up with a design for 370Z as well the upcoming Titan pickup.[3]
Crowd-sourcing the Nissan 370Z 

So what about rising transportation and production costs? And what about the eco-friendly madness?

The answer comes in the form of go-green eco-friendly products. Herman Miller the Michigan based furniture manufacturer and Gordon Murray have figured this one out. By designing furniture using recyclable and biodegradable materials Herman Miller has created a massive appeal for today’s environmentally conscious consumer hence achieving that competitive edge they need. Secondly, Gordon Murray, the former F1 designer has shifted his focus towards constructing practical low cost sturdy electric cars which helps reduce the production infrastructure required, saving space and helping to relocate near markets.

A switch from Petrol and diesel engines to electric motors is also another response to present constraints where manufacturers have tried to squeeze out the same petrol engine performance from electric motors such as the 2014 Mercedes-Benz SLS AMG Electric[4] and the new McLaren p1[5] or the more efficiency oriented Toyota Prius.

McLaren P1 -Top Gear S21E02

Another cost mitigating and time saving measure companies have started to adopt is moving their offshore production back in an attempt to have more control over their supply chains as well as develop more ethos in their home countries. A notable example is Apple, moving its display production to Texas, US and investing into greener solar power for their factories.

However what worries me greatly is the development of 3D printers which I believe would gravely affect how supply chains are going to be organized in future. To me this feels like cloud computing. Borrowing cheap processing power and accomplish what was previously unfathomable. This would not only cause the production to be more flexible but it would cause a creative explosion. Households would transform into unique cottage industries.
  • So my question with taking manufacturing on a whole new “Personal Level” as suggested by the article is that “How are we going to regulate production? What if people start designing and printing guns? 
  • “How are going to ensure quality and safety standards?
  • Is bringing production back to US replacing expensive labor with robots the way to go? If labor is unemployed in the US it must be laid off everywhere else. Nobody wins?

[1] http://www.touringsuperleggera.eu/en/products8.php
[2] https://www.threadless.com/
[3] http://www.motorauthority.com/news/1089731_nissan-crowd-sourcing-the-design-of-next-titan-pickup
[4] http://www.caranddriver.com/news/2014-mercedes-benz-sls-amg-electric-drive-photos-and-info-news
[5] http://cars.mclaren.com/p1.html

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