Logistics Challenge of Customisation

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Logistics Challenge of Customisation

• Janny Leung
• Systems Engineering Engineering Management
  Department
• The Chinese University of Hong Kong

2
The Evolution of Marketing
The new 4 P's'
Product - the essence of what we offer the
customer Processes - system and activities that
support provision of the core product or
services Performance - do we get it right? Have
we live up with our promises? People
- interaction with employees make or break!
3
Changing Customer Expectations

• Shortening product life cycles
• Higher service requirements
• Global market -- segmentation
• Product proliferation
• multi-stage, multi-vendor production
• global transportation logistics
• demand
• cost
• leadtime

Uncertainty!!
4
Product variety is increasing

• Crest toothpaste have 35 options (flavors and
  package sizes)
• HP workstations have 500,000 options (RAM cards,
  video cards, graphic cards, monitors, disk
  drives, etc..)
• GM cars have 20,000,000 versions (color, interior
  combinations, drive train configurations, and
  option choices)

5
Pitfalls of increasing product variety

• Demand may not increase -- (Quelch Kenny, HBR
  1994)
• total demand spread over more SKUs
• reduced product life cycle
• Forecasting nightmare
• High manufacturing cost
• High inventory cost
• Poor availability of product to customers
• High product support and service costs
• Mark-down sales at the end of product life

6
Postponement A Strategy for managing product
variety in Global Market

• Postponement Delaying the point of product
  differentiation
• Two types of postponement
• Logistic postponement moving customization point
  to closer to customers
• Form postponement delaying differentiation point
  by standardizing parts, products and processes

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HP???????

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HP Universal Power Supply

• A new network printer for world-wide distribution
• 110V and 220V power supply for North American and
  European markets
• Long lead time from engine manufacturing (by
  Japanese partner) to printer customers
• High regional split forecast error !

Hau Lee
9

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????-????????????????? ?? 2002?11?
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Form Postponement at HP DeskJet Printers

• Standardization -- Mono/Color Printer

Mono Printer
Color Printer

• Cost -- Additional materials
• Benefit -- Lower Inv.. and Higher Service Level

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Logistics PostponementImpact on Distribution
System
17
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Advantages of Postponement

• Lower inventory cost
• Improved product availability (better customer
  service)
• Lower burden on forecasting
• especially during ramp-up and end-of-life
• Lower reconfiguration costs for trans-shipment
• Lower obsolescence and write-offs
• Higher design, manufacturing/material costs

13
Logistics Challenges to Automotive Industry?

• Thank you