Best Tools For Design For Excellence Supply Chain Management

What is a Supply Chain?

We can define a supply chain as a sequence of processes in a product's life cycle, from the procurement of raw materials to the sale of a product. The four main elements are:

Procurement
Production
Storage
Distribution

Initial design and development stages determine up to 80% cost of the final product. Aspects such as the amount and lead time of raw material/components, supplier location, standardisation of components, physical features and complexity of a product deserve attention in the initial stages for better operations management.

What is Supply Chain Management?

Supply chain management is the process of managing goods and services from the initial stages of manufacturing all the way up to providing after-sales services/warranty for a product.

A product's design may be the very best in the market, but it may have high supply chain management costs due to poor operations management of its various elements. It is therefore prudent to start factoring in decisions for supply chain management as early as possible.

What is Design for Supply Chain (DfSC)?

Design for supply chain or DfSC is a discipline of DFX that provides practical techniques to optimise a product's design to integrate it with the supply chain.

Traditionally, operational logistics have always been an afterthought and their design comes much later in the product development process. This is because many companies fail to understand the role of product design in the supply chain.

Why do we need Design for Supply Chain?

Research has shown that decisions taken during the design stage have a considerable effect on agility, customisation strategies, supply chain and product life costs. Smooth collaboration between the product development, manufacturing, marketing, procurement, finance and supply chain management teams can improve the value of a product significantly while reducing overall costs.

A well-thought-out DfSC strategy can improve responsiveness, supply chain visibility and communication, diminishing product costs, time-to-market and supply chain risks. All these benefits give a company an incredible competitive advantage over its competitors in the global market.

Design for supply chain proposes making changes in the design to improve the overall logistical efficiency of a product.

Design for Supply Chain Principles

DfSC techniques are an efficient tool to create a product that integrates well with the logistics system. While component and manufacturing costs still play an integral role in the total costs of a project, an optimum supply chain will have a major influence.

Thus, we list out different DfSC strategies to bear in mind in the product design phase that will influence the supply chain.

Use standard parts

standard parts

Using standard parts in products instead of proprietary parts is advisable to maintain an uninterrupted supply of said parts. In the event that a supplier cannot complete an order, you can easily find another supplier.

Standard parts are also cheaper as their manufacturing is usually carried out on a larger scale.

Prefer pre-assembled parts

Many times, suppliers are capable of some preliminary assembly on their part. This reduces the assembly time in the company's manufacturing process. This can be understood with a simple example.

Suppose a product is made of an assembly of three individual components. The manufacturing process design can enable the assembly of two of these parts at a supplier's warehouse before they are shipped for the final assembly with the third component.

So even if the third part arrives late and you can start the work on the final assembly later, you will have saved time by letting others do part of the work for you.

Prefer fewer sources

If possible, limit the number of subcontractors used for manufacturing your parts. Commonly, every manufacturer offers a variety of services but does not cover all of the necessary fabrication methods of a project.

If the designer knows about these limitations, he can keep them in mind during the design phase.

For example, if the assembly only requires a single CNC machined part that would be made by another subcontractor (because the one taking care of sheet metal fabrication doesn't provide machining services), it would be best to at least try to find an alternative design solution.

This way, you can keep the sources minimal, reducing points of contact and limiting the different logistical puzzles while lowering the stress on supply chain capabilities.

Another option is to make the supply chain/outsourcing manager aware of the requirements as early as possible. This means he has plenty of time to find a manufacturing partner to cover all the necessary requirements for the project at hand.

That is also the reason why we at Fractory have partnering suppliers with different capabilities to offer a one-stop solution with a single point of contact, as it reduces the difficulty of finding the right solutions for each project as well as minimises the strain on supply chain management.

Prefer local

If possible, make sure that your supply chain involves as many local manufacturing partners as possible. It doesn't mean that you should always turn to your neighbour, but outsourcing to other countries for minimising costs can backfire.

This is especially evident in today's world where the Covid situation has put a great strain on supply chains all over the world, with production lines sitting idle due to the shortage of certain parts.

Of course, the costs may be a lot lower somewhere else. But if you add the shipping costs, lead times (waiting also costs) and involved risks into the equation, it might often turn out that the cheaper face value may be easily be surpassed by the quickness and stabile nature of turning to local (at least in the same country).

Control expedited freight costs

Expedited freight, commonly known as hotshot services, are often a major contributor to transportation costs. This cost, however, is controllable through smart product design and supply chain management. Critical parts for a product must be identified, and their lead times must be controlled for an uninterrupted supply.

The designers must also consider what alternate components could be used for manufacturing in the case of a shortage due to increased demand or diminished supply.

To prevent such an occurrence, the company must give the part suppliers sufficient lead times and demand forecasts well in advance. This helps them commit to more accurate delivery plans and avoid the need for expedited freight.

Product development teams must also consider the impact of any design changes on storage and transportation. Sudden, drastic changes that involve heavier components can create part scarcity and freight costs.

Plan for product evolution

Products evolve with time. Product designers must evaluate a product for potential modification in its architecture in the future and ensure these changes are supply chain friendly.

Some examples of such design changes are size variation, fragility, technology update and infrastructure upgrade. All these changes directly affect the logistics system and need careful planning and smooth execution for minimum disturbance to it.

Another helpful design tip to reduce the strain on the supply chain is to transition technology as soon as possible. A long drawn out transition strategy places an unnecessary burden on the chain to maintain inventory, service levels and supply of older components.

If a technology is approaching end-of-life, strategists recommend proactively phasing out older technology and simultaneously introducing new technology.

Reduce inventory costs

Inventory is the total stock of components needed for product fabrication, assembly, and shipment. Design decisions can affect inventory levels for a product. For example, designing a product with fewer components leads to shorter aggregate lead times.

Reducing lead times enables a company to work with a smaller inventory at a time.

An additional design tip to improve inventory levels is to reconfigure components for alternate use. A small inventory saves money for the company in areas such as maintenance, storage and shipping. It also increases flexibility while reducing waste and obsolescence risk.

Adopting the right supply chain design

Product design teams (PDT) can contribute to the selection of the right supply chain management technique for the product by supplying relevant information and adopting various recommended practices during design.

This selection must be made with the company strategy in mind and not the attributes of each product. For example, whether the manufacturing process design is for high volume products (>10000/year) or low volume-high complexity products (10/year to 10000/year).

For high complexity products, greater customisation needs are customary and the design team determines the number of variants and the extent of each customisation. Due consideration must be given to the ability and feasibility of switching the supply chain type in the future if the need arises.

Cut down on warranty costs

Design teams can eliminate servicing and warranty costs to a large extent by building reliability and other relevant features into the product. These features that improve product quality will be costly to develop, but they will usually offset the much higher warranty costs.

The PDT must strive to build self-diagnostic features that can alert the operator of part or function failure in the product, especially for critical parts with a relatively high failure rate. This minimises the number of service calls as users can troubleshoot more effectively.

Minimising warranty costs means the need to ship and store fewer parts and tools at service centres. The need for a wider distribution network also goes down.

Example of DfSC – The Design of an Aluminium Can

aluminium soda cans

Let us discuss the design of an aluminium soda can to appreciate DfSC better.

Each year, approximately 180 billion aluminium soda cans move through their distribution network to reach consumers. The most common shape for these cans is that of a cylinder. But it wasn't always so.

Initially, many different shapes were proposed to store beverages along with the cylindrical shape that is so popular today. Due to the sheer scale of the process, a small change in the product design could multiply exponentially and translate either into big costs or big savings.

The idea of a spherical can was first floated around. A spherical can meant the lowest cost of raw materials, as they have the smallest surface area for a given volume. But they would only have a packing efficiency of 74%. 26% of space would be wasted during transportation and storage, even when spheres were packed as closely as possible.

This would increase logistics cost as fewer cans could be transported and stored at any given time and a greater number of trips would be needed. They would also be less stable and roll right off without much stimulus.

To maximise packing efficiency, the next idea was that of a cuboid soda can. Cuboid cans have a packing efficiency of almost 100% and are hard to tip over, but are difficult to hold and weird to drink from, lowering customer satisfaction. Besides, a cuboid has high-stress concentration at its walls. To overcome this, engineers proposed thicker walls that would increase raw material costs.

Thus, the consensus was to opt for a cylindrical soda can that incorporated the elements of the spherical as well as the cuboidal can. It offered a packing efficiency of 91%, which was much better than that of a sphere, while providing sufficient strength through the circular walls.

Their manufacturing was relatively simple too. Thus, cylindrical soda cans became the standard due to their many advantages in regard to the supply chain.

The above example shows that a design team's familiarity with the product's supply chain processes can enable them to create designs that sync better with the supply chain management. While not losing sight of usability and other important features.

Challenges in DfSC Implementation

There are some common challenges that get in the way of efficient application of DfSC in many companies. By proactively addressing these issues, any company can reap the many benefits of DfSC. Let us see what these obstacles are.

Isolation of functions

Product development is largely the domain of product design engineers who work in isolation oblivious to other business functions such as procurement, logistics and marketing, each of which is integral to successful and competitive supply chain management. This is the norm for traditional companies with a "silo mentality".

What worsens the situation is how the goals of different departments can be contradictory, making it difficult to increase cooperation between them.

Geographical distance of supply chain members

With increased distance and distribution between supply chain partners and their functions, DfSC is difficult to implement in product design.

For example, some of the most popular companies with global markets such as Apple, Sony, Microsoft, Samsung and Canon manufacture their products thousands of miles away in Shenzhen, China. It complicates operations management, effective collaboration between departments, and increases the risk profile of supply chains.

Customer integration

Customer preferences are an important indicator of growing market trends and must be rapidly accounted for in product design through the supply chain.

All the above-mentioned challenges can be hard to overcome with isolation of functions being the most common enemy to tackle before moving on to supply chain optimisation.

Conclusion

There is no second opinion that design has a huge impact on the cost and effectiveness of supply chains. As a result, design and supply chain management teams must come together to produce a product that is built for the selected supply chain.

Sharing information is key. Designers usually have little information about the ideal processes and materials for a product in regard to the proposed supply chain. But this information and more, such as the availability of different components, is already available with the logistics team.

Yet, procurement and supply chain teams often learn about such important product details too late, only when they are asked to procure the materials.

A cross-functional design process can reduce overall costs by 38% compared to the traditional linear approach. Thus, in order to prevent the negative impact of design on the supply chain, it is crucial that DfSC is opted for.