Page 50 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes In spite of this challenge, if mass customisation can be successfully implemented, it is possible
to see intuitively that it is the key to increasing value through the provision of unique personal
satisfaction; and, of course, this has the potential to generate additional marginal revenue. A
second consideration, a more profound and fundamental one, is that the overall effect on inventory
related costs can be very positive as production is based on real demand. This is essentially the
transformation of the supply chain to a pull system at the customer end. This means that the
manufacturing process is completed when definite information regarding customers' preferred
configuration or design is available. And, you may have guessed correctly, this information,
along with the customers' willingness to wait for the product, are crucial elements, along with
the specific characteristics of the product, which would make mass customisation successful.

Example: An example of mass customisation is what is done by Dell computers. Dell's
direct supply chain model based on Internet orders and direct shipment to customers in their
preferred configuration has made Dell the favoured subject matter of many case studies.

Deciding Product Architecture

The first step in developing a new product strategy is that the organizations should decide their
target customers, what they value, and the likely size of the market of their interest. These are
key inputs to make product architecture decisions. Product architecture should establish three
things:

1. Specify the functional capabilities of the product, its features, and post-sale servicing
needs.
2. Specify the capabilities of the product delivery system and post-sale support that the
customer expects and determine the ability of the organization to provide for these, and
3. Specify the roles and risks each player within the supply chain will assume.
For businesses that make to stock or assemble to order, the business process that develops a
product's architecture must deal with a number of design issues, such as:
1. Can a 'make to stock' product meet the core needs of target customers?
2. Can a 'make to stock' product with a flexible set of optional functional modules satisfy the
mix variety demanded by the buyers who want 'assemble to order' products?
3. How can product designers divide the functions of the product among separate modules
effectively and how should the modules interface with each other?
4. How much 'technical risk' can the design take?
5. What should be in-house development and what should be contracted out?
These are product design decisions that fall beyond what was called a line of visibility in the
service area and a product's customer. But within the firm, they have important effects, not only
on product quality, but also on the resources needed to effectively perform the development
process.
Good product architecture can help designers develop products capable of providing the firm
with a competitive advantage. If being fast to market or fast to product is a strategic goal, then
the ability to achieve these ends starts with good product architecture.

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