“Efficient” and “cheap” may have been the mantras of supply chains in the not-too-distant past; however, the idea of a responsive supply chain based on cross-timely involvement across the enterprise is now growing. The approach, called Design for Supply Chain, creates products that are built for a specific supply chain. It involves making and standing behind decisions from design inception through product end-of-life, and goes a long way to eliminate the current gaps between designers, procurement, and supply chain teams.
Design for Supply Chain
Unfortunately, designers are often in the dark regarding optimal processes and materials for their design regarding the proposed supply chain. They’ve had little access to data concerning the long-term availability (and expected lifetime) of components upon which they build their designs. Procurement and supply chain managers discover shortages and other component and material access challenges far too late in the current process.
The Designing for Supply Chain approach addresses multiple challenges.
According to NPD Solutions, eighty-five to ninety percent of a product’s cost is committed by the time the product is designed and its manufacturing process is developed. Most experts say that approximately 80% of product costs are determined by key decisions made early on in the design process. During the initial design process, decisions based on the availability and lead time of raw materials and components, geographic locations of suppliers, sourcing risks, potential for modular design, component standardization, and product complexity should be on the table—but seldom are.
Design for Supply Chain provides practical techniques to optimize a product’s design to integrate it with the supply chain. Early decisions require collaboration between the product development, manufacturing, marketing, procurement, finance, and supply chain management teams. This approach improves responsiveness, supply chain visibility, and communication while lowering product costs, time-to-market, and supply chain risks.
Challenges in Transition
So, how do you move to Design for Supply Chain? It will be necessary first to change how you make decisions regarding new product design. To get there, you will need to look at workflow, responsibilities, supply chain management, etc.
Here are a few changes you can implement:
- Choose standard parts for an uninterrupted supply
- Use pre-assembled parts to reduce assembly time during manufacturing when possible
- Limit the number of subcontractors used for manufacturing parts and understand the limitations of those you are using
- Try to be as local as possible vs. outsourcing to other countries to minimize costs
- Control expedited freight costs
- Plan for product evolution and how it could affect your design
- Implement transitions rapidly, such as component end-of-life
- Reduce inventory levels when possible
- Build better reliability into the product to reduce warranty costs
For the people-centric portion of the transition, consider the following:
- Share information and adopt recommended practices
- Increase milestone review cycles as products get close to launch
- Consistently evaluate components and report the status to the team
- Conduct a minimum of four formal product reviews and have teams within the process conduct ongoing reviews
- Create a purchasing group dedicated to new products to handle materials control
- Enable the new products team to work directly with contract manufacturers so that materials flow and disruptions are identified, and corrective actions are taken
- New products teams must focus on risk management and have a process to hand off to steady state team approximately six weeks after launch
- The steady-state team takes ownership, driving the project with factories and driving supply to execution
What could Possibly go Wrong?
Product design engineers are usually isolated and oblivious to procurement, logistics, and marketing functions. The goals of these different functions are often contradictory, and cooperation can be minimal. The geographical distance of supply chain members hampers Design for Supply Chain. However, creating a cross-functional design process can reduce overall costs by approximately 38%.
As companies increasingly onshore or nearshore, the transition is a perfect time to begin implementing Design for Supply Chain to improve the overall logistical efficiency of a product.
In the past, the concentration was on Design for Cost, since there was confidence that the supply chain would execute flawlessly. Flawless no longer describes supply chains.
Product costs are determined mainly by product design, and functionality and performance alone are no longer sufficient criteria. Logistics and distribution costs, inventory, product availability, serviceability, and flexibility in dealing with the unexpected are considerations affected by product design and the manufacturing process. Moving to Design for Supply Chain incorporates all aspects that, when implemented, can dramatically improve profitability and lower costs.