When designing the supply chain, companies must determine the best way to meet customer needs. Recently, companies have started to realize that an important component of making supply chain improvements is making changes to the design of products and processes to better meet customer demands.
Product design can also address the costs involved with transportation and inventory. These are often critical supply chain cost drivers, especially when inventory levels must be kept high to ensure service levels.
Product design can address these supply chain issues using the following three key components:
- Packaging and transportation
- Concurrent and parallel processing
Packing and transportation
One of the most important areas of product design is ensuring that products can be packed and stored efficiently. Goods that can be packed compactly are obviously cheaper to transport. A common example of this use of product design is flat-pack furniture.
As well as cost reductions, retailers are more likely to choose a supplier with products that take up less storage space and that can be stacked easily.
Weight is also a product-design issue that will affect transportation costs. A company might find that more expensive, lighter materials are cost effective when reduced transportation expenses are taken into account.
Concurrent and parallel processing
Lead times associated with suppliers, manufacturing processes and deliveries are a major interruption to the flow of the global supply chain.
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In many manufacturing situations, a series of products or components are produced and then put together to make a final product. Delays can occur between each stage in the manufacturing process.
In concurrent and parallel processing, the manufacturing process is redesigned so that all production steps take place at the same time. This reduces manufacturing lead time and reduces inventory costs.
Companies can standardize product components or processes. In product standardization, common components are used in many different products. This reduces the requirements for extensive component inventories and reduces costs.
In process standardization, the manufacturing process is standardized as much as possible for all different products. Products are only customized and differentiated late in the production process.
Process standardization usually involves redesigning products so that they can be customized late in production.