Design for Supply Chain

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


7. Minimize Inventory Costs: The two key inventory costs to consider are carrying costs and obsolescence risk. Carrying costs can be reduced when product has quick build-to-ship times and favors a build-to-order (BTO) as opposed to a build-to-stock (BTS) supply chain model. Also, designing to maximize the velocity of parts through the supply chain will reduce inventory value and reduce cost take-downs while inventory is being held. Obsolescence risk can be minimized using short lead times and easily reconfigurable components. Like carrying costs, designing for high velocity movement will also help with obsolescence risk. Configuring for customization at the end of the assembly line will minimize risk by increasing flexibility. Finally, PDTs should configure product components for reuse into the next product transition in the event that obsolescence does occur.

8. Optimize Order Management: Product design should consider the facilitation of order management and customer fulfillment. Product design should be adjusted to provide the maximum level of flexibility to the customer with little or no additional internal cost. This can be accomplished by using the DfSC techniques to facilitate postponement and unbundle P/Ns, thereby reducing complexity and increasing flexibility and order management. PDTs should also consider the ease of special order entry and manufacturing. The structure of the bill of material needs to leverage the capabilities of the order management systems and facilitate quick and accurate communication of requirements to manufacturing.

9. Minimize Warranty/Service Costs: Warranty costs are minimized by a reliable, high quality product with easy to diagnose faults and customer replaceable parts that have a high warranty redemption value. Using the DfSC techniques can increase flexibility in terms of alternative parts usage for service. A common part for warranty use may be beneficial even when common parts for base unit manufacture did not make good business sense. Minimizing the portfolio of parts that need to be stocked for service and warranty decreases expense and improves service levels. This is especially important for those parts that have the highest typical defect rates. Additionally, designs that integrate automated internal diagnostic capabilities may increase component costs but vastly decrease overall costs through the facilitation of easy defect assessment. The use of a serviceability assessment tool (SAT) to provide a service cost estimate that can be a key decision point when gauging increased component costs against service expenses.

The profitability of maintenance contracts can be maximized by product testing that identifies both intrinsic and systemic failure modes, and then configuring the product and the supply chain to cost effectively addresses them.

Conclusion

A highly efficient supply chain that offers the greatest flexibility and customer service at the lowest cost can be a substantial differentiator against growing competition. By using Design for Supply Chain techniques to optimize products in the design phase before manufacturing even begins, or in some cases after it has begun, supply chain disruptions can be avoided and costs of change minimized. The DfSC strategies and concepts outlined above will give any product design team — whether designing for a high-tech server or a high-volume consumer good — the basis for creating products that allow the supply chain to efficiently satisfy customer demands.

About the Authors: Heather E. Domin joined IBM in 2005 after receiving a M.S. degree in Management Systems from Clarkson University. She joined IBM Integrated Supply Chain in Raleigh, N.C., where she has worked on solving worldwide supply chain challenges. She currently plays an integral role in IBM's Design for Supply Chain core team.

James Wisner played a prominent leadership role in the formation of IBM's Design for Supply Chain program. He started his career with IBM's Global Services consulting organization and is currently working in Raleigh, N.C., for the engineering division of IBM's Integrated Supply Chain. Wisner holds a MBA degree from Harvard University.

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