Page 49 - DMGT501_OPERATIONS_MANAGEMENT

Unit 2: Product and Service Design

In fact, under plausible conditions, these effects dominate the traditional risk-pooling benefits Notes
associated with delayed differentiation, in which case early differentiation is the dominant
strategy for firms, even under cost parity with delayed differentiation. We extend the main
model to study the effects of alternate market structures, asymmetric markets, and inventory
holdback. Our results – in particular that for a broad range of parameter values, early
differentiation is a dominant strategy even under cost parity with delayed differentiation – are
robust to these relaxations.
The strategy of achieving competitive superiority through postponement and customization
requires, in order to reduce cost and increase manufacturing efficiency, certain design attributes.
These are commonality, modularity and standardisation.

2.6 Commonality

Commonality of components used to manufacture similar products is essential to reduce the
number of components to be held in stock to cater to all possible combinations of a customer's
customization spree. The postponement allows the products to assume their unique characteristic
as late as possible.

Example: A cellular phone manufacturer making various models can keep the component
inventory level low when almost all components used by all models are common.
The customisation is done by postponing the final assembly of the casing and perhaps some
added functional feature till customers indicate their choices for the unique combinations.

Recycling Component Commonality

Recycling refers to the recovering of materials or components for future use. There are several
reasons for recycling may be cost considerations, environmental concerns or environmental
regulations. Recycling involves the collection of used and discarded materials processing these
materials and making them into new products.
Waste recycling has some significant advantages:
1. Leads to less utilization of raw materials.
2. Reduces environmental impacts arising from waste treatment and disposal.

3. Makes the surroundings cleaner and healthier.
4. Saves on landfill space.
5. Saves money.
6. Reduces the amount of energy required to manufacture new products.

2.7 Mass Customization

The concept of mass customisation is built on the concept of postponement. This is the extreme
form of postponement as the product is subject to the final configuration as and when the
customers' specific order is known. The aim is to provide the customer with custom solutions or,
in other words, exactly what he or she wants, but to provide this with the same efficiency
achieved in mass production. This is a considerable challenge when we consider how individual
choices can vary and what it means to configure products, especially complex products, to each
customer desired configuration given that firms are always under pressure of reducing system
wide costs through reduction in inventory and the achievement of shorter lead times.

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