Supply Chain Management and product design
Supply chain can be described as a network of businesses linked either in upstream or downstream activities. Supply chain management has been described as the integration of many different businesses along a supply chain and co-ordination of different activities, information flows and materials in order to fulfill consumer demands and also to make the overall supply chain more efficient. Upstream activities consist mainly of procurement activities while downstream activities deals with distribution and activities through which the product reaches the end consumer.
When these activities are carried out externally the managers involved at each stage have to make sure that the deliveries are made as scheduled. The main idea behind using SCM to improve products and services is to collaborate with other firms in order to cut down production cost and time without compromising on the quality of the product. Higher efficiency can be achieved by mutual understanding between the parties by reducing the uncertainties and risks involved.
Three important activities of any organization are determining the product design, layout and selecting the process in order to make the final product. I will discuss each of these and how they relate to supply chain management. Product design is a cross functional activity
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Firms need to keep designing new products and also reinventing older products to remain competitive and meet consumer needs. New products are also a source of high sales revenue especially if the product is unique; it allows the firm to practice premium pricing. 40 percent of sales revenue comes from new products and if a firm is unsuccessful in creating new products suppliers often take their business else where. Product design is about developing the features and characteristics of the product that consumers demand.
It is an important activity in all organizations because organizations have to make sure that the product is functional, appeals to its customers, is produced at the lowest cost and time possible. The product made should be of the best quality but should use low cost materials at the same time. Product design also includes integrating key members of the supply chain. Outsourcing is considered an important activity in which many firms are engaging in today. Suppliers are encouraged to take part in the product design process so the design process becomes more refined.
Supply chains need to manage its members such that timely information is circulated among all supply chain participants; this ensures that required product is made when it is needed and as efficiently as possible(Bozarth & Handfield). The speed with which new products are hitting the market and also the need to innovate creates extreme pressures on corporations. For example until recently European and American automotive manufacturers took around 48 to 60 months to manufacture new models while Japanese came up with high quality models with in 30 months and were thus gaining first mover advantages.
Then they changed their product design process from being in a relay fashion to a more of a rugby style. Relay style involved the product design to pass from one functional department to another while rugby style is about different functional department collaborating and working simultaneously. This saves a lot of time for the firm and the design is made at a much faster pace Bozarth & Handfield. Competitiveness is about nurturing and developing a competitive edge faster and cheaper than your competitors, in an away that it allows you to develop unique products that are distinct from that of your competitors.
Competitive edge develops overtime and is a collection of the knowledge gathered. Firms should always try to take advantage of their competitive edge. When firms try to do this they often need to outsource activities that do not provide a competitive edge to the firm. This is especially true when designing new products, more firms are outsourcing their new product development and re-engineering process. Firms are now realizing the benefits they can receive by integrating their processes with suppliers.
A proactive approach needs to be developed when integrating suppliers in the product development process. Strategic alliance should be developed especially with suppliers that have technology as their core competitiveness, also open information sharing should be done. Strategies should be such that they encourage input from suppliers and makes it easier for them to communicate their ideas. For a firm that has technological products in the market, or wants to redesign its manufacturing processes it may not be necessary for it to have a competitive edge in technology any longer.
Technology can be acquired or co-developed with the help of other supporting firms. Many firms have successfully used technology developed by other firms to come up with innovative products. Japanese automotive firms have used borrowed technology many times and very successfully. Firms that do not have the funds to conduct R&D can benefit extensively by importing innovative ideas and using them to make products that they otherwise would not have been able to (Bozarth & Handfield).
Today internet and global competition has made it imperative that firms focus on their core competencies only and outsource rest of the activities, products need to be designed in modules, so that some modules can be outsourced and others can be produced by the firm itself. Outsourcing is about letting other firms do part of the business process e. g. distribution, supplying or manufacturing if it improves the overall efficiency of the Supply chain and serves as a competitive edge for the firm. Outsourcing and making other units part of the supply chain has many advantages.
One of the major advantages is that it allows managers to focus on and improve core competencies, administrative burdens are reduced. On research shows that when firm are not outsourcing managers spend only 10% of their time strategizing and thinking, most of the time is spent on administrative and tactical issues, however when they start outsourcing managers have about 60% of time to devote to strategic planning. Designing products for supply chain management simply means making products that can make your supply chain more efficient.
Customer’s demands need to be satisfied keeping efficiency and effectiveness of the design in mind. The various partners of the supply chain should not be stressed out because of the product design. If the product requires excessive inventory to be held, or if the product isn’t attracting the customers or if the costs are too high and the supply chain too complex, then redesigning the product to take advantage of the competencies of your supply chain can be highly beneficial for a firm.
Though product design is important, a product cannot be made efficiently without the right production process. Some firms may sell standardized products while others tend to customize their product depending on individual consumer requirements, depending on this some firms may have a single production process while others may have many production processes working simultaneously. Production processes can be grouped broadly into two categories: intermittent and repetitive.
Intermittent processes are those that are used to produce a number of products using different processes and repetitive processes produce the same product in higher volumes. Product design and process selection are dependent on each other, product design determines what processes are selected and that in turn affects the way the organization functions as a whole. Products may be designed keeping the process in mind. The third aspect of an organization to be discussed is layout. Layout is the arrangement of resources in a way that allows efficiency to be maximized.
Haphazardly arranged resources will create inefficiencies and waste. What processes are used has a direct affect on the layout of resources. A repetitive process will have a straight forward layout, often an assembly line process is used where the unfinished product passes from one stage to another in a flow. Intermittent process is slightly more complicated as different products pass through different processes so resources are arranged in a functional way. It is challenging to arrange these in a way that efficiency is maximized and inefficiencies are minimized.
If this is not done then the product will have to be moved long distances and the focus of setting the layout should be to eliminate any activity that doesn’t add value to the product. Usually activities that involve a lot of exchange should be placed next to each other(Bozarth & Handfield). Supply chain is not only about moving goods from end to another but it also includes decisions about where to produce, how much to produce, how much to hold in inventory, how to exchange information with various partners in the value chain etc.
The layout should also be made in a way that it allows different parties in the process to exchange information. The focus of the layout should be to allow speedy communication between partners so that products are made as needed and without any inefficiency. One example of such a layout is that of Zara’s which is a clothing retailer, as trends and fashion styles are always evolving it is very important for supply chain members to remain in touch and up to date. At Zara’s the resources are arranged in one big hall, and circular tables are arranged to facilitate communication between the members.
The units are arranged in a way that the physical closeness between the departments makes procurement, production and commitment of resources much easier. It reduces bureaucracy within an organization by removing layers and allowing easy communication. So it is obvious that processes, product design and layout form very important factors in supply chain management and should be considered by organizations who want to compete effectively in today’s world.
Page Bozarth, Cecil C. & Handfield, Robert B. Supply chain management. Prentice Hall,2007.