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Module SCM106: Product and Process Design for Supply Chain Management
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| $60 | Approx.
1 - 2 hours | Approx.
10,600 words |  
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Counts toward Fundamentals of Supply Chain Management |
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| Promotions: | Save $60 on "Fundamentals of Supply Chain Management" bundle; buy modules SCM102, SCM103, SCM104, SCM105, and SCM106 together and save $60 |
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...We have created a downloadable Microsoft® Excel spreadsheet that licensed viewers can use to experiment with postponement calculations similar to those presented above. If you enter actual monthly demand data for several products in the spreadsheet, it will automatically calculate the reduction in safety stock if postponement is implemented.
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It is important to note that the spreadsheet must be used carefully; while users are encouraged to experiment with the file...
...A medical device company was recently surprised to learn that demands across its different product lines were highly correlated; they had incorrectly thought that sales across product lines would be independent! Some reasons for this could be sales-force incentives or quarterly budget targets; whatever the cause, correlation of demands reduces the benefit of risk pooling.
The results of the "quick estimate" formula for values of N from 1 to 25 are plotted in the figure below. Note that for high values of N there are large reductions in safety stock:
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Exercises
There are three short exercises below. Use the menu below to try each one:
Suppose your company's sales for the last 12 months were as follows (some rows may be blank):
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...A tool called conjoint analysis may be used to estimate the potential benefits from offering customization. Conjoint analysis refers to a method of evaluating consumer preferences by asking individuals to make choices between different sets of options. For example, an auto manufacturer could show consumers a series of paired car profiles with different prices and optional equipment, and for each pair, ask them to select which car they would prefer. The product profiles are carefully selected to help researchers identify consumer choices; sophisticated models analyze the choices consumers made, to identify which options are most important and how much consumers would be willing to pay for them. Provided the sample of consumers is representative of your target market, this information can help you determine what kinds of customization to offer, how to price it, and its expected impact on sales and market share.
Conjoint Analysis
(pairing example) |
| Car A | Car B |
$25,000
Front & side airbags
Premium stereo
5-liter engine
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$21,500
Front airbags only
AM/FM radio
5-liter engine
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| << strongly prefer A | strongly prefer B >> |
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| Conjoint analysis would ask a series of questions similar to the above; for each pairing, the customer chooses one of the buttons based on how much they prefer choice A or choice B. As the customer makes choices between various prices and features, patterns of preferences emerge. These patterns can be used to place a value on customization of products (whether to offer choices, how many to offer, and what price to charge for each). |
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Mass customization may not be suitable for all products and markets, nor is every implementation a "win-win"...
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