{"56529":{"#nid":"56529","#data":{"type":"news","title":"Designing for the Supply Chain","body":[{"value":"\u003Cp\u003E\n\u003C\/p\u003E\u003Cp\u003EThe creative process of product development shapes the very texture of our lives\u003Cbr \/\u003E\n  today, from what we eat and wear to our most sophisticated communications systems.\u003Cbr \/\u003E\n  In most companies, product development focuses on creating a product line to\u003Cbr \/\u003E\n  meet form, function, performance, and basic cost targets. Designers often work\u003Cbr \/\u003E\n  closely with manufacturing and, in some cases, with suppliers who may offer\u003Cbr \/\u003E\n  specialized knowledge of various components. Their communication with the supply\u003Cbr \/\u003E\n  chain organization, however, comes only after product design is complete. That\u0027s\u003Cbr \/\u003E\n  because designers typically view the supply chain as a delivery system. \u003C\/p\u003E\n\u003Cp\u003EBut product design dictates much of the cost of the supply chain. In fact,\u003Cbr \/\u003E\n  Hewlett Packard considers 80% of all supply chain costs as built right into\u003Cbr \/\u003E\n  the product. This means that the product itself determines 80% of the cost\u003Cbr \/\u003E\n  of delivering it, which leaves supply chain design to work out the remaining\u003Cbr \/\u003E\n  20%. So the options are to tinker around the edges of total supply chain cost\u003Cbr \/\u003E\n  or to integrate product design efforts with supply chain design efforts--and\u003Cbr \/\u003E\n  work directly at the heart of total supply chain costs.\u003C\/p\u003E\n\u003Cp\u003EIKEA Puts It All Together\u003C\/p\u003E\n\u003Cp\u003EIt\u0027s just this type of strategic product design and supply chain integration\u003Cbr \/\u003E\n  that has made IKEA of Sweden the world\u0027s largest furniture retailer, with revenues\u003Cbr \/\u003E\n  of more than $15 billion and 128 company-owned stores in 26 countries. A relative\u003Cbr \/\u003E\n  newcomer to the North American market, IKEA is considered one of the world\u0027s\u003Cbr \/\u003E\n  most successful multinational retailing operations. IKEA\u0027s ready-to-assemble\u003Cbr \/\u003E\n  furniture reflects the company\u0027s integrated vision of supply chain and product\u003Cbr \/\u003E\n  design. \u003C\/p\u003E\n\u003Cp\u003EIt is no coincidence that the company is famous for both the ease with which\u003Cbr \/\u003E\n  customers can carry home and assemble its furniture and the efficiency of its\u003Cbr \/\u003E\n  logistics and distribution system. IKEA even operates its own railroad to deliver\u003Cbr \/\u003E\n  product from \u0026Auml;lmhult in Sweden to Duisberg, Germany, a distance of more\u003Cbr \/\u003E\n  than 1000 km. In 2002, IKEA Rail moved 20 million cubic meters of merchandise,\u003Cbr \/\u003E\n  and it is forecast to move 80 million in 2010. IKEA\u0027s furniture is designed\u003Cbr \/\u003E\n  and manufactured to fit in flat, standardized packages that ship economically,\u003Cbr \/\u003E\n  require less space, and are easy for consumers to take home.\u003C\/p\u003E\n\u003Cp\u003EBegin at the End: Redesign Your Packaging\u003C\/p\u003E\n\u003Cp\u003EIKEA forms project teams to design products that are aesthetically appealing,\u003Cbr \/\u003E\n  easy to assemble, and economical in terms of materials, storage, and transport.\u003Cbr \/\u003E\n  The company\u0027s strategy and operations revolve around the integration of product\u003Cbr \/\u003E\n  design and supply chain. \u003C\/p\u003E\n\u003Cp\u003EReaching this level of integration doesn\u0027t happen overnight, but when it works,\u003Cbr \/\u003E\n  the results are impressive. The biggest challenge in designing products for\u003Cbr \/\u003E\n  the supply chain is the cross-functional nature of the process, which requires\u003Cbr \/\u003E\n  engineering, marketing, manufacturing, finance, and supply chain team members\u003Cbr \/\u003E\n  to collaborate and communicate. But getting these people together can be daunting. \u003C\/p\u003E\n\u003Cp\u003EAn excellent place to begin the process is with packaging. Packaging is usually\u003Cbr \/\u003E\n  one of the last activities in product development and does not usually involve\u003Cbr \/\u003E\n  the same level of personal investment--or ego--as, for example, product design.\u003Cbr \/\u003E\n  The principal challenge in redesigning packaging from a supply chain perspective\u003Cbr \/\u003E\n  is that the necessary knowledge and information reside in several different\u003Cbr \/\u003E\n  organizations. Many companies not only outsource many of their logistics activities,\u003Cbr \/\u003E\n  they also outsource package design activities to packaging suppliers who understand\u003Cbr \/\u003E\n  the materials and how best to use them for both product protection and marketing. \u003C\/p\u003E\n\u003Cp\u003EThe packaging providers sell products by weight and so tend to concentrate\u003Cbr \/\u003E\n  on that aspect of package design--sometimes with conflicting motivations. After\u003Cbr \/\u003E\n  all, a packaging company that sells, say, corrugated products has every incentive\u003Cbr \/\u003E\n  to design packages that use more corrugated materials. The farther you ship\u003Cbr \/\u003E\n  products, however, the more significant the volume of the packaging becomes\u003Cbr \/\u003E\n  as the driver of total delivered cost. The cost of moving container loads of\u003Cbr \/\u003E\n  products across the Pacific, for example, is typically based on volume rather\u003Cbr \/\u003E\n  than weight.\u003C\/p\u003E\n\u003Cp\u003EPhilips and Hewlett Packard Lose Weight\u003C\/p\u003E\n\u003Cp\u003EDuring a recent in-depth study of its packaging, Philips Consumer Electronics\u003Cbr \/\u003E\n  developed several strategies from a volume-based rather than weight-based perspective.\u003Cbr \/\u003E\n  According to Ab Stevels of the Philips Environmental Competence Centre and\u003Cbr \/\u003E\n  adjunct professor in the Executive Master\u0027s in International Logistics (EMIL)\u003Cbr \/\u003E\n  program at Georgia Institute of Technology, the company could realize an improvement\u003Cbr \/\u003E\n  of 40% to 60% in both economical and environmental costs with the implementation\u003Cbr \/\u003E\n  of packaging redesigns. \u003C\/p\u003E\n\u003Cp\u003EPhilips began the process with a competitive analysis of packaging performance\u003Cbr \/\u003E\n  based on weight, volume, and ecological indicators to help identify opportunities\u003Cbr \/\u003E\n  and set realistic targets for reducing integrated packaging and logistics costs.\u003Cbr \/\u003E\n  They also evaluated trends, including the increase in average transport distances\u003Cbr \/\u003E\n  and the fact that more sales are taking place in large outlet chains, which\u003Cbr \/\u003E\n  buy in bulk. They found they could reduce the distribution costs for TV sets,\u003Cbr \/\u003E\n  for example, by 55% by instituting several volume-based strategies. The savings\u003Cbr \/\u003E\n  come from increasing the number of sets transported per truck (17% cost savings),\u003Cbr \/\u003E\n  increasing the number of sets per square meter of warehouse floor (15% cost\u003Cbr \/\u003E\n  reduction), and so on. Almost all the savings were largely attributable to\u003Cbr \/\u003E\n  a reduction in the ratio of package volume to product volume. \u003C\/p\u003E\n\u003Cp\u003E Hewlett-Packard found similar opportunities in packaging redesign. Last year,\u003Cbr \/\u003E\n  its inkjet printer business improved the package-to-printer volume ratio by\u003Cbr \/\u003E\n  45%, which nearly doubled the number of printers per pallet and reduced the\u003Cbr \/\u003E\n  total logistics costs for some products by 50%.\u003C\/p\u003E\n\u003Cp\u003EThe Time Is Now: Models for Change\u003C\/p\u003E\n\u003Cp\u003E These examples highlight the savings possible by integrating product design\u003Cbr \/\u003E\n  and supply chain performance--and packaging is just the tip of the iceberg.\u003Cbr \/\u003E\n  It\u0027s no surprise that the idea is gaining momentum. The Supply Chain Council,\u003Cbr \/\u003E\n  one of the industry\u0027s leading professional organizations responsible for the\u003Cbr \/\u003E\n  Supply Chain Operations Reference (SCOR) model, is now launching the Design\u003Cbr \/\u003E\n  Chain Operations Reference (DCOR) model. Just as SCOR defines supply chain\u003Cbr \/\u003E\n  processes, DCOR defines processes in the product design chain that will lead\u003Cbr \/\u003E\n  to improved performance. Such a model will provide a common language for solutions\u003Cbr \/\u003E\n  from vendors, consultants, and other partners. It will allow for industrywide\u003Cbr \/\u003E\n  benchmarking and accelerate the focus on measurable process outcomes from both\u003Cbr \/\u003E\n  business value and customer value perspectives. \u003C\/p\u003E\n\u003Cp\u003EDCOR is initially focused on developing open standards for the design process.\u003Cbr \/\u003E\n  That\u0027s a first step toward integrating product development and supply chain\u003Cbr \/\u003E\n  management. It\u0027s a promising sign that two organizations from opposite ends\u003Cbr \/\u003E\n  of the spectrum--the Supply Chain Council and the Product Development and Management\u003Cbr \/\u003E\n  Association--are coming together to develop DCOR. Finding common ground for\u003Cbr \/\u003E\n  designers and supply chain professionals to communicate and collaborate will\u003Cbr \/\u003E\n  lead to better delivery of better products while adding value that will reach\u003Cbr \/\u003E\n  all the way to the consumer.\u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":"","field_summary_sentence":"","uid":"27279","created_gmt":"2004-09-01 00:00:00","changed_gmt":"2016-10-08 03:06:15","author":"Barbara Christopher","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2004-09-01T00:00:00-04:00","iso_date":"2004-09-01T00:00:00-04:00","tz":"America\/New_York"},"extras":[],"groups":[{"id":"56347","name":"EMIL"}],"categories":[{"id":"145","name":"Engineering"},{"id":"135","name":"Research"}],"keywords":[],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cstrong\u003EBarbara Christopher\u003C\/strong\u003E\u003Cbr \/\u003EIndustrial and Systems Engineering\u003Cbr \/\u003E\u003Ca href=\u0022http:\/\/www.gatech.edu\/contact\/index.html?id=bt3\u0022\u003EContact Barbara Christopher\u003C\/a\u003E\u003Cbr \/\u003E\u003Cstrong\u003E404.385.3102\u003C\/strong\u003E","format":"limited_html"}],"email":["bchristopher@isye.gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}