Design for Supply Chain

Nine cutting-edge strategies that will change the way your company designs new products and transform your supply chain


The Nine Key DfSC Strategies

1. Optimize Levels of Product Integration: PDTs should determine the optimal level of integration, or parts, that have been pre-assembled at an upstream supplier. This can be a difficult decision because while integrated components can reduce the number of parts that need to be managed in final assembly and allow for a reduction in assembly time (often by limiting the number of physical interconnections on the manufacturing line), this bundling of P/Ns can create additional supply risk in several ways. First, it can make it more difficult to accurately forecast demand for the part because each integrated component presents another demand variable that must be factored into the forecast for the overall part. Second, aggregate lead times may be increased for an integrated component. Take, for instance, a case where there are two components, each with a lead time of one week. With two distinct suppliers, the components can ship on the same day to arrive at manufacturing for assembly within a week. For integration, the first component must ship to the supplier of the second component before facing the standard lead time of one week, resulting in an extended aggregate lead time.

To help with the decision, consider the degrees of commonality, modular design, universal function and postponement that can be imbedded in the integrated part — a common building block used across multiple offerings increases the value of disintegration by allowing postponed features to use a shared supply. While maintaining a competitive part cost is always an important factor, in some cases overall savings be realized even when an individual part's cost is increased.

2. Leverage Industry Standards: Use industry standard parts unless proprietary parts are justified to create a competitive advantage. A standard part uses the vendor part number with no unique marking or other requirements. Industry standard parts allow suppliers to pool demand across the industry, rather than relying solely on their ability to forecast demand for the unique part. In addition, industry standard parts allow for increased flexibility in sourcing from other suppliers and facilitate the cost-effective disposal of excess inventory when needed. Thus, unless the use of a unique part has a specific value add, industry standard parts should be used whenever possible. The perception of greater control by placing unique qualifications on industry standard components needs to be objectively evaluated.

Similarly, inventories of unique parts for original equipment manufacturer (OEM) customization should also be carefully monitored. PDTs should consider in the design stage what aspects of the product will and will not be available for OEM customization and design so that the product is configured to be line-fit to postpone any OEM personalization as far downstream as possible. Costs are minimized by not having to plan and maintain stocks of unique high-value OEM inventory. Where possible, these OEM-specific inventories should be owned by the OEM.

3. Minimize Premium Freight: Premium freight and resources to expedite supply can often compose a large portion of supply chain costs. In order to minimize these costs, DfSC techniques should be used to reduce lead times on critical components while maximizing the availability of alternate components in the event of a shortage. Long lead times result in volume fluctuations at the back end. It is important to consider flexibility in suppliers and integrated components. For example, when evaluating integration alternatives assess the trade-off between a lowest-cost approach for accurately planned requirements and the real need for low-cost flexibility to address unplanned events. The product should also be designed for compatibility and commonality with predecessor components or for alternate parts usage with other current products.

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