Design for logistics encapsulates three concepts. These are economic packaging and transportation, concurrent and parallel processing, and standardization. In the case of HP, the problem they have is that there is a weakness in demand forecasting procedures, manifesting as either understocking or having dead inventory in various markets (Kopezak & Lee, 1994). The use of economic packaging and transportation will result in a greater carrying capacity to help develop and maintain safety-stock to forestall shortages.
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Concurrent and parallel processing will improve the rate at which HP can produce the required products without the need to wait for a particular product to move through the production line. Finally, standardization will ensure that the company can concentrate its innovative efforts towards fewer components hence increasing the benefits of economy of scale.
Delayed differentiation is a production concept that applies to a specific product range that results from a generic model. In order to apply delayed differentiation, there must be a way of reorganizing the production process to bring in the differentiators in the final stages of development. It allows a company to aggregate demand and later on in the production process, to respond to the specific demands within a much shorter time. HP can use delayed differentiation by standardizing the parts used in its printers and fitting in the specific model requirements in the last stage of production.
There is a specific challenge in quantifying the advantages of delayed differentiation that comes from the cost of implementing measures to enable delayed differentiation. Delayed differentiation results in a higher per-unit production cost. In order to quantify its advantages, it is necessary to look at the benefits that accrue, which normally includes increased sales volume because of a better response to consumer demand.
Traditionally, manufacturers involve suppliers after the completion of the design in order to get materials needed for the manufacture of the product. However, there is a strong case for involving suppliers early on during the design process. The benefits that accrue from involving the suppliers early on include getting better prices for the materials, getting higher quality materials, and benefitting from the advice of the suppliers. Involving suppliers early also helps companies to find out what their key competencies are in order to concentrate on their strengths.
Mass customization is a sort of hybrid concept that resulted from the combination of two different manufacturing models. In the past, managers made a choice between the mass production of a narrow range of products in order to compete on price, and custom-made products, which competed on uniqueness. Mass customization attempts to give a business the capacity to develop highly customized parts with the efficiency of mass-production methods. The application of this concept relies on the development of very efficient work teams and production modules, which can produce unique parts within their area of specialization. Upon receiving an order, the work teams are able to produce a unique product at a very competitive cost.
The role that supply chain management plays in the development of effective mass customization is the development of strategies that ensure the smooth work of various work teams. It is the role of supply chain management to define the requirements for the work teams in order to create the environment necessary for the effective implementation of mass customization.
The Great Rebate Runaround
Offering rebates on products gives the manufacturer a greater amount of control over their cash flow as compared to reducing wholesale prices. Rebates come after a customer spends the full amount on the product’s price tag. The catch then is to apply for a rebate within the given time. What happens is that many customers, up to forty percent, simply do not claim the rebate resulting in increased revenues for the manufacturer. On the other hand, decreasing the wholesale price locks out the potential revenue the manufacturer would get on unclaimed rebates.
It still makes a lot of sense for manufacturers to offer rebates because it improves their cash flow, and hence the health of their business. More importantly, it locks the customers in, making it possible for them to make further promotional advances on the customer. The other reason is that customers tend to feel less pain when making a buying decision if they believe they will receive part of the money back.
The reason that Best Buy, rather than the big suppliers would like to eliminate rebates is the backlash from customers who are against rebates. Rebates formed the number one customer complaint at Best Buy. Best Buy deals directly with customers, it is important for it to listen to their complaints. Failure to do this may lead to the loss of customers. Big suppliers do not deal directly with customers, and the complaints they get do not deal with pricing models but the performance of their products. In addition, they have multiple outlets for their products. However, they understand that rebates have a significant effect on the buying decision of the customers. They therefore would like to see them stay.
Kopezak, L., & Lee, H. (1994). Coordinated Product and Supply Chain Design. Case Study , 331-404.