Case studies of postponement in the supply chain

Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Civil and Environmental Engineering, 2006.Includes bibliographical references (p. 85-88).The thesis addresses the growing trend in business to offer a wide variety of products while maintaining customer order fulfillment expectations. This trend is happening at the same time the US is losing manufacturing jobs to overseas labor markets, namely China, India, and Central America. While it may not be possible for the US to compete with these countries on the basis of labor costs or even quality in manufacturing, it can compete in the area of faster delivery times and product-service interaction which must inherently take place onshore. Postponement is a strategy that allows businesses to take advantage of the offshore capacity and labor for manufacturing in addition to local finishing centers for final assembly, packaging, and distribution. Postponement is widely used in the automotive, apparel, and consumer electronics industries. Many companies produce products that are candidates for postponement but are unlikely to undergo the implementation changes necessary to support it. This thesis highlights some of the leading companies who are pioneers of postponement and includes case studies of additional companies who have followed their lead.(cont.) They have seen the tangible benefits of lower inventory costs, quicker response time, better forecasts, and more variety as well as the intangible benefits of better customer service and the coordination and integration of manufacturing, sales, and marketing functions. The assortment and range of case studies suggest that postponement is used across a breadth of industries and not only profitable as a business strategy but also as a means for creating local jobs because of the inherent product-customer interaction.by Susan M. Rietze.S.M

Decreasing product variety-driven costs: The view point from complexity management and component commonality in batch-process context

The case company suspected it had too many products variants for its inner customers in contrast to the inflexible batch process production. Literature recognizes the negative effect of product variety on economic and operational performance in batch process industry. Component commonality is a way to decrease variety and recognized as a cost reducing method, although lacking ways to find potential targets. In contrast, complexity management is useful for reasoning what is causing product driven complexity, but too abstract for cost analysis. The objective of this study is to analyze the cost effect of product driven complexity by recognizing potential targets and ways to decrease these complexity costs. This can be achieved by combining complementary theories about complexity management and component commonality, in order to calculate the cost effect of decreasing complexity. The thesis is an interventionist case study analyzing the cost effect of component commonality. The research was an iterative process reflecting between theory and case context, in order to investigate the effect of product variety on the case company performance and consequently a potential cost effect of decreasing the variety i.e. product-driven complexity costs. Paper mill conducted research in addition provided qualitative and quantitative data about the subject throughout the process as well as other units of the company. As a result, the thesis recognized the most potential product attribute to decrease excess complexity that was not driven by customer. The decreased complexity turned into costs in following fields; longer production runs, lower inventory level and positive effect on cost driver use. More speculative cost effects supported by theory could supplement these direct cost effects. Results support the literature view on effect of increasing product variety and opposite effect of component commonality. Contribution to literature based on combining component commonality and complexity management itself and bringing these theories into a context of batch process industry and two-stage value chain. These two theories resulted not only better understanding about the cost effect, but also how complexity can be managed better in value chain. This means eliminating excess internal complexity, balancing between internal and external complexity and pushing the point of differentiation late as possible. In the end, the product design decisions are linked to the competitive advantage of the case company

Optimizing The Level Of Customization For Products In Mass Customization Systems

Mass customization (MC) was developed to capitalize on the combined benefits of economies of scale and economies of scope. Balancing the tradeoffs involved in an MC system warrants the determination of the degree or the extent of customization. Most of the literature views the degree of customization as how early or how far the customer is integrated in the production cycle, which is defined as the order decoupling point. In this study we are addressing the degree of customization from a product structural perspective. There are two objectives in this research. The first is to develop a unit of measurement for the degree of customization of a product in an MC system. The second is to construct an optimization model to determine the level of customization that would best satisfy the organizational goals. The term Magnitude of Customization (MOC) has been introduced as a measuring unit for the degree of customization on a customization scale (CS). The MOC is based on the number of module options or the extent of customizable features per component in a product. To satisfy the second objective, an analytical model based on preemptive goal programming was developed. The model optimizes the solution as to how far an organization should customize a product to best satisfy its strategic goals. The model considers goals such as increasing the market share, and attaining a higher level of customer satisfaction, while keeping the risk or budget below a certain amount. A step-by-step algorithm is developed for the model application. A case study of an aluminum windows and doors company is used to verify and validate the model. A double panel sliding window is selected as the subject of our study. Information related to company goals and objectives vis-a-vis customization is gathered, through interviews and questionnaires, from the upper management including Operations, Marketing, and Finance Departments. The Window design and technical information are collected from the Manufacturing Department. The model and its solution provided specific recommendations on what to customize and to what degree to best satisfy primary strategic goals for the organization. Results from the model application shows that the company is able to meet the five goals that they had identified with two goals having a deviation of 4.7% and 6.6% from the targets. To achieve the stated goals, the model recommends an overall degree of customization of approximately 32.23% and delineates that to the component and feature levels. For validation, the model results are compared to the actual status of the company and the manufacturer\u27s recommendation without prior information about the model outcome. The average difference, for attaining the same goals, is found to be 6.05%, at a standard deviation of 6.02% and variance of 36.29%, which is considered adequately close. The proposed model presents a framework that combines various research efforts into a flexible but encompassing method that can provide decision-makers with essential production planning guidelines in an MC setup. Finally, suggestions are provided as to how the model can be expanded and refined to include goal formulations that accommodate potential MC systems and technology advances. To the best of our knowledge, this research is a pioneer in quantifying customization in an MC environment and relating it to the organizational goals through modeling and optimization

ALIGNMENT OF BUSINESS STRATEGY AND SUPPLY CHAIN MANAGEMENT: a study of medium-to-large-sized internationalized German companies from an international business student perspective

In an increasingly globalized world, effective supply chain management and its alignment with a company’s business strategy is seen as a firm’s competitive advantage. Existing studies, which were conducted in internationally known companies, suggest three main strategies: Lean, agile and leagile supply chain strategies. Lean supply chain strategies in markets with a stable demand follow a cost-minimizing approach. Agile supply chain strategies in markets with an unpredictable demand focus on differentiation, innovation and flexibility in order to fulfill customer-specific demand. Finally, leagile supply chain strategies try to combine lean aspects for a base demand and agile aspects for more customer specification. This study researches internationalized medium-to-large-sized German companies with the purpose of understanding how companies can improve their supply chain management from an international business perspective. Results are based on the analysis of qualitative data collected through 14 semi-structured interviews with employees from the SC or business department. Findings suggest that lean, agile and leagile supply chains exist as described in the literature. Furthermore, the supply chain strategies called ‘project’ SC and ‘capable’ SC were found. Project SCs are used for a fixed period of time in order to conduct customer-specific ventures. They are a specialized version of agile SCs with the difference that they are constructed from scratch. Capable SCs are characterized by delivery reliability and speed and customer closeness in markets with predictable demand. They can be considered an advancement of leagile SCs. Furthermore risk- hedging SC management was researched. Moreover, the changes in strategies over the years were examined and the meaning of increased automation and usage of computerized systems in the context of industry 4.0 were questioned. The results show that changes and technology play different roles according to industry. In conclusion the findings cannot be generalized due to the small sample size. However, the results give an insight into current supply chain management strategies that can lead to the practical implication of integrating the customer more in the SC. In the future SCs could have increased transparency, flexibility, and simultaneity. Further quantitative research is recommended.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format

Platforms and real options in large-scale engineering systems

Thesis (Ph. D.)--Massachusetts Institute of Technology, Engineering Systems Division, 2006.Includes bibliographical references (p. 141-151).This thesis introduces a framework and two methodologies that enable engineering management teams to assess the value of real options in programs of large-scale, partially standardized systems implemented a few times over the medium term. This enables value creation through the balanced and complementary use of two seemingly competing design paradigms, i.e., standardization and design for flexibility. The flexibility of a platform program is modeled as the developer's ability to choose the optimal extent of standardization between multiple projects at the time later projects are designed, depending on how uncertainty unfolds. Along the lines of previous work, this thesis uses a two-step methodology for valuing this flexibility: screening of efficient standardization strategies for future developments in a program of projects; and valuing the flexibility to develop one of these alternatives. The criterion for screening alternative future standardization strategies is the maximization of measurable standardization effects that do not depend on future uncertainties.(Cont.) A novel methodology and algorithm, called "Invariant Design Rules" (IDR), is developed for the exploration of alternative standardization opportunities, i.e., collections of components that can be standardized among systems with different functional requirements. A novel valuation process is introduced to value the developer's real options to choose among these strategies later. The methodology is designed to overcome some presumed contributors to the limited appeal of real options theory in engineering. Firstly, a graphical language is introduced to communicate and map engineering decisions to real option structures and equations. These equations are then solved using a generalized, simulation-based methodology that uses real-world probability dynamics and invokes equilibrium, rather than no-arbitrage arguments for options pricing. The intellectual and practical value of this thesis lies in operationalizing the identification and valuation of real options that can be created through standardization in programs of large-scale systems. This work extends the platform design literature with IDR, a semi-quantitative tool for identifying standardization opportunities and platforms among variants with different functional requirements.(cont.) The real options literature is extended with a methodology for mapping design and development decisions to structures of real options, and a simulation-based valuation algorithm designed to be close to current engineering practice and correct from an economics perspective in certain cases. The application of these methodologies is illustrated in the preliminary design of a program of multi-billion dollar floating production, storage and offloading (FPSO) vessels.by Konstantinos Kalligeros.Ph.D

Spare parts on demand using additive manufacturing : a simulation model for cost evaluation.

Little is known about the impact of additive manufacturing in the spare part supply chain. A few studies are available, but they focus on specific parts and their applications only. A general model, which can be adapted to different applications, is nonexistent. This dissertation proposes a decision making framework that enables an interested practitioner/manager to decide whether using additive manufacturing to make spare parts on demand is economical when compared to conventional warehousing strategy. The framework consists of two major components: a general discrete event simulation model and a process of designing a wide range of simulation scenarios. The goal of the dissertation is to help verify existing as well as gain new knowledge about operations of additive manufacturing and the cost implication in the spare parts supply chains. Particularly, the proposed model enables simulation based analysis with various strategies, setups, specific parts, machines and system operating parameters. Furthermore, the process related issues of interest are the influence of building speed, building space volume, material price, machine purchase price and cool down time. Strategy related issues are multi-machine and multi-material production strategies in several setups. Also simulation investigation of different spare part stock properties are executed and analyzed by using different part size distributions. This dissertation establishes fundamental understanding of the characteristics of the additive manufacturing system for spare part supply strategies. This model could directly help the decision-making processes in whether to adopt additive manufacturing technology, and also helps the evaluation of different additive manufacturing strategies when the technology is adopted. Both decisions (adoption and strategies) are made based on cost analysis for spare parts in a broader supply chain

Supply Chain Management of Mass Customized Automobiles

Challenges of mass customization has increase dependence upon supplier, disruptions from suppliers have resulted many times in stop of production from OEM. Keeping this in background, this study analyzed supply chain policies and practices with in the modern automotive industry. The study focused on three German automotive companies, Mercedes Benz, BMW and Volkswagen, all three companies are investigated through qualitative and quantitative analysis. Qualitative analysis showed outsourcing demands high level of managerial changes in supply chain structure. Moreover, OEM needs to manage not only Tier I supplier but Tier II supplier as well. A quantitative approach addresses the issues related to inventory management, distributional policies and downstream supply chain and their impact on supply chain efficiency under mass customization. The results suggests to increase raw material inventories and to decrease in-house operation. Furthermore, it is more profitable to keep production near the markets. The results also suggest that the issues of downstream supply chain have a strong and significant impact on supply chain efficiency under mass customization

Exploring Cloud Adoption Possibilities for the Manufacturing Sector: A Role of Third-Party Service Providers

As the manufacturing sector strides towards digitalization under the influence of Industry 4.0, cloud services have emerged as the new norm, driving change and innovation in this rapidly transforming landscape. This study investigates the possibilities of cloud adoption in the manufacturing sector by developing a conceptual model to identify suitable cloud-based solutions and explores the role of third-party service providers in aiding manufacturers throughout their cloud adoption journey. The research methods consist of a comprehensive literature review of the manufacturing industry, digital transformation, cloud computing, etc., followed by qualitative analyses of industrial benchmarks case studies and an investigation into an application of the developed model to a hypothetical food manufacturing company as an example. This study indicates that cloud adoption can yield substantial benefits in the manufacturing sector, including operational efficiency, cost reduction, and innovation, etc. The study concludes that the developed conceptual model provides a practical framework to identify the most suitable cloud-based solutions during the cloud adoption process in the manufacturing context. In addition, third-party service providers like Capgemini are capable of not only filling the technical gaps but also consulting strategic directions and innovations for their client organizations, hence playing a vital role in driving the industrial digital transformation process. With an extensive mapping of their capabilities, a set of recommendations intended to assist Capgemini in enhancing capabilities and improving competitive performance in the market has been offered