Therefore, it is important to consider those currency trends and exchange rates where suppliers, Manufacturers and markets are located. Responsiveness and agility are becoming important competitive attributes in addition to quality, variety and price.
This leads to employing the concept of 3-dimensional concurrent engineering 3D-CE , as a step beyond design for supply chain and concurrent engineering. This concept was first discussed by Fine to understand and coordinate the interdependencies among product and process design and supply chain decisions, to maximize the operational and supply chain performance.
Furthermore, by considering different product design alternatives while configuring the supply chain, the optimum locations and capacities of various nodes can be defined. Currency Excange Rate Past Trend , Present Value and Future Projection In this paper, a comprehensive decision support model has been developed to concurrently determine the optimal product modularization scenario and the global supply chain configuration in a 3 echelon suppliers, manufacturing facilities and distribution centers global supply chain system considering the procurement costs, production, inventory and transportation costs along with the impact of changes in the global market currency exchange rates.
The application of the decision support model is evaluated using historical data from an automobile wipers system manufacturer. In section 2 the relevant literature is reviewed. Section 3 describes the developed global supply chain decision making mathematical model and section 4 analyzes the proposed decision making model using data for a generic globally distributed supply chain for an industrial product.
Finally in section 5 the conclusions and the future research direction for this line of research are presented. Economic packaging, concurrent and parallel processing and postponement strategies Time and Form are the three key components of design for supply chain management and commonality, standardization and modularity are some of the important concepts to implement postponement.
Concurrent Design of Product Modules Structure and Global Supply Chain Configuration In , Nielsen and Holmstrom studied the benefits of taking account of supply chain considerations in the design and process engineering stages in a European car manufacturer offering a large number of options with each model.
They argued that designing common components and creating variety at the final assembly stage postponement can be a good alternative to pilling inventory of each product variation high inventory cost or waiting for the suppliers to deliver the customized product delay cost. They developed an analytical model to quantify the complex impacts and benefits of cost drivers like, stock-outs, reconfigurations, manufacturing, logistics and inventory. Garg studied three product and process modular design alternatives, which differ in their number of supply chain stages and the sequence of some of the processes, for a new line of products to identify the feasible set of product and process designs in terms of their total inventory cost using the Supply Chain Modeling and Analysis Tool SCMAT.
Many researchers have recently focused on the application and implementation of 3D-CE to maximize operational, supply chain and firm performance. Fixon argued that the product architecture, when properly defined and articulated, can serve as a coordination mechanism and presented a multi-dimensional framework for a comprehensive assessment of product architecture. Huang et al. They define the scope of supply chain configuration decisions quite broadly to include supplier selection, selection of transportation delivery modes, determination of inventory quantities and stocking points, manufacturing processes to use and production time.
Su et al. Blackhurst at al. Petersen et al. Fine et al. Extensive research can be cited discussing supply chain structures and performance. In , Van Hoek, introduced a framework to analyze the configuration of supply chain in the context of global strategy and showed that implementation of postponed manufacturing not only requires the reconfiguration of the logistic systems but also other operations in the supply chain.
Karabakal et al. Hahn et al. Tyagi et al. Billington et al. In , Nagel et al. They considered cost-based, environmental and performance-based objectives as their evaluation criteria in their study. A real options approach was used to estimate the value of flexibility and determine the optimum strategy to manage it under uncertain currency exchange rates. Forecasting currency exchange rates has always been considered by many researchers to reduce the uncertainties and risk of decision making in different areas.
Weigend et al. Little work has been done on the development of decision support models for concurrent supply chain and product module structure design considering the global issues in supply chain design. Our proposed decision support model is unique in the sense that it supports concurrent design of product module structure and supply chain configuration while considering the currency exchange rate variations in a global supply chain environment.
Global supply chain model An optimization-based decision support model, which determines the best way to split production and procurement of a product modules for a global supply chain system is proposed. It selects the optimal set of product module structure and the corresponding supply chain configuration taking into consideration the currency exchange rate in each period at each location while minimizing the overall system cost.
Figure 2 shows the generic supply chain and the points of currency exchange rate considerations. The decision support model is formulated using mathematical programming where the decision variables are, NM pnmsit , as the number of module i purchased in period t from supplier s to produce product n under scenario m at plant p. X pnmt as the number of units of Scenario m of product family n produced at Plant p in period t.
I pnt , as the inventory of product family n in Plant p at the end of period t. TU pkt, the number of transportation units Concurrent Design of Product Modules Structure and Global Supply Chain Configuration used to ship products from Plant p to distribution center k in period t. O pt , total overtime scheduled at Plant p in period t. Agile Supply Chain Strategy Agile manufacturing calls for a high level of rapid reconfiguration and will eliminate as much waste as possible but does not emphasize the elimination of all waste as a prerequisite.
In the broader supply chain context, two key concepts are consistently linked to agility: flexibility and speed Goldman et al. Agility refers to effective, flexible accommodation of unique customer demands. Agility is the ability to respond to short-term changes in demand or supply quickly and handle unexpected external disruptions smoothly and cost-efficiently Madhani, Total lead-time defined as the time taken from a customer raising a request for a product or service until it is delivered has to be minimized to enable agility, as demand is highly volatile and thus difficult to forecast for certain product types.
A supply chain will not be able to respond rapidly enough to exploit marketplace demand, if it has long end-to- end lead-time. Agile supply chains must be flexible, and hence robust, to the range of market changes the supply chain is expected to cope with Stevenson and Spring, and will, in fact, exploit this capability to achieve competitive advantage. An agile supply chain strategy is aimed at being flexible by adapting quickly and effectively to rapidly changing customer needs.
In short, agile strategy is not committing to products until demand becomes known. Thus, it allows the supply chain to provide customers with customized products Qi et al. Organizations with the agile supply chain strategy require capability of higher capacity in order to be able to react to possible volatile fluctuations in demand. In this way, agile supply chain has ability to respond to actual changes in demand in real time and hence it is market sensitive.
A critical element in the agile supply chain is to carry inventory in a generic form — that is, standard, semi-finished products awaiting final assembly Christopher, The agility of the supply chain can be increased by adopting postponement to move one or more activities forward until demand is known.
Agile supply chains deploy make-to-order provisions for producing only what has already been committed to sold in the marketplace. Dell is well-known example of agile practices in its direct-to consumer business model. Dell was able to build agility into its supply chain by keeping materials undifferentiated until customer demand became known. The computer maker allows its customers to place an order and customize their PCs electronically. Once Dell receives customer order then it is transmitted to appropriate production facility to start PC production.
Dell then quickly configures the components into finished desktop and laptop computers that meet customer-specific orders. The make-to-order approach does call for the consumer to wait as opposed to pre-positioned finished goods inventories found in make to-stock operations.
Having postponement in the supply chain allowed the suppliers to adjust their production schedules and plans ahead for the components needed for production. Yusuf et al. Lee argues that an agile supply chain strategy allows the supply chain to respond quickly to short-term changes in customer demand, and consequently enables the firm to handle the uncertainty in the market.
An agile strategy also requires the supply chain to maintain a higher capacity buffer in order to enable it to respond to the volatile market Qi et al. A fundamental difference between lean, agile and leagile supply chain networks is the fact that they have different requirements for different types and levels of flexibility. Accordingly a framework for supply chain flexibility is proposed, that is then used to develop a lean, agile and leagile supply chain taxonomy.
Lean, Agile and Leagile Supply Chain Strategies and External Flexibility In a volatile marketplace, agility deploys market knowledge to exploit profitable business opportunities. However, where customer requirement for variety is high and demand is volatile, a much higher degree of agility is required. The agility is the subsequent phase of leanness.
Thus, once leanness has been achieved, the supply chain must make efforts for agility, and accordingly the agility should be the objective of a supply chain Mason-Jones et al. Agility, finds its roots in flexible manufacturing systems Sanchez and Nagi, According to Yusuf et al. Consequently, Swafford et al. Flexibility tends to be used at a lower, more operational level, whereas agility tends to be used at a more holistic, business wide level Baker, This particularly raises issues relating to the best fit of a competence with the needs of an organization facing fast changing customer demands in the marketplace Chiang et al.
In this context, one of the greatest distinctions between lean and agile players is in the flexibility performance dimensions as the pursuit of agility might presume leanness, in contrast the pursuit of leanness might not presume agility Narasimhan et al.
A distinguishing feature of an agile organization is flexibility as origins of agility lie in flexible manufacturing systems. An agile supply chain strategy is aimed at achieving flexibility and adaptability in the face of changing customer needs and competitive environments through quick, dynamic and continual response.
Hence agile systems are robust to changes or disturbances, whereas lean systems aim to minimize internal and external variation as much as possible, placing more rigid controls on flexibility types. There are five different types of external flexibility: new product the range of, and ability to accommodate the production of new products , mix the range and ability to change the products currently being produced , volume the range of, and ability to accommodate changes in production output , delivery the range of, and ability to change delivery dates and access the ability to provide extensive distribution coverage Naim et al.
Supply network flexibility comprised of two key concepts: Vendor Flexibility and Sourcing Flexibility. Vendor flexibility refers to the flexibility related to individual vendors within the supply network, which may be manufacturing, warehousing or freight transportation, with each node having its own internal flexibility capabilities Gosling et al.
These two types of flexibility i. High Quadrant 1 Quadrant 3 Agility Flexibility Mix Leagility Leanness Quadrant 2 Quadrant 4 Low Low High Volume Flexibility Figure 1: Supply Chain Strategies: Roles of External Flexibility Source: Matrix developed by author On this basis, as shown in Figure 1, it can be inferred that a lean performers, who operates under stable demand conditions low volume flexibility can exhibit either low levels of both volume flexibility and mix flexibility i.
As a result, a lean supply chain strategy will enhance the responsiveness of the supply chain Figure 1. On the other side, an agile performers, faced with high levels of demand uncertainty, can exhibit either high levels of both volume and mix flexibility Quadrant 3 - agile , or high levels of volume flexibility but low levels of mix flexibility Quadrant 4 - relatively less agile depending on their product mix. Lean versus Agile Supply Chain Strategy: Key Determinants Only after thorough understanding of the particular characteristics of the product type, marketplace requirements and management challenges the correct supply chain strategy can be designed by firms to ensure optimal performance and to establish competitive advantage.
In lean manufacturing, the customer buys specific products, while in agile manufacturing the customer reserves capacity that may additionally need to be made available at very short notice Christopher, These two product types respond to distinctly different marketplace pressures and hence require a different supply chain approach to address their specific characteristics.
It is on the nature of that demand and the basis of meeting customer demands in which the two approaches differ Goldsby and Garcia-Dastugue As fashion products are characterized by shorter product life cycle PLC and high demand uncertainty, it exposes supply chain to the risks of both product obsolescence as well as stock out. Consequently the purchasing policy moves from placing orders upstream for products moving in a regular flow to that of assigning capacity to finalize products in rapid response mode See Table 1.
The major challenge faced by a fashion supply chain is to respond faster to the marketplace by developing a strategy that will improve the match between supply and demand. Thus, the characteristics of fashion products are more suited to the agile environment where the unpredictability of the demand is accepted as a business risk and the strategy is developed to optimize performance in such condition.
However, basic commodities products such as cereals, soaps etc. The driving force for basic product supply chains is therefore cost reduction. Hence, lean supply systems are often associated with cost effectiveness and level scheduling.
According to study of Naylor et al. There are several examples that show the need to develop hybrid strategies comprising benefits of both lean and agile supply chain strategies Christopher and Towill, Aitken proposed that it is possible to reap the benefits of both lean and agile concepts and they both can co-exist. It was further confirmed by Krishnamurthy and Yauch that lean and agile can co-exist and they illustrated it by using data from a firm in the USA.
Agarwal et al. Aronsson et al. The base vehicles are produced in a lean manner in Japan and shipped to the U. Toyota caters to this market through marketing mechanisms that avoid the mainstream media, choosing instead to sponsor local sporting events, concerts, and enthusiast clubs Oser, Here major emphasis is on individuality when selecting and owning a car.
Therefore, base vehicles may be produced in a lean manner, leaving the agile accommodation of customer-specific needs for the port facility or the dealer Goldsby et al. If properly managed, lean and agile businesses can co-exist, even when on the same site Aitken, Following are three practical ways of marrying the lean and agile paradigms based on appropriate market conditions and operating environment Christopher and Towill, Make to forecast 1.
Low priority in production 2. High priority in production schedule schedule 3. Economy of scale 3. Quick response and 4. Maximize efficiencies continuous replenishment 4.
For slow moving and less predictable 80 per cent products a more agile mode is required. As shown in Figure 2, supply chain strategies may be designed for the predictable 20 per cent lean approach and the more volatile 80 per cent of products agile approach.
By utilizing the concept of postponement, firms may utilize lean methods up to the de-coupling point DP and agile methods beyond it Harrison et al. The approach calls for lean operations in the production of generic, semi-finished product, and agile accommodation in the customization process Mason-Jones et al. As such it provides possibility of modular production or intermediate inventory as well as delayed final configuration or distribution.
An example is the customized PC Christopher and Towill, Hewlett-Packard has successfully employed such strategies to enable products to be localized much closer in time to actual demand Feitzinger and Lee, Economic batch 1. Forecast for capacity, quantities execute to demand 2.
Manage inventory 2. Localized configuration Strategic Inventory centrally Figure 3: Leagile Supply Chain Strategy: De-coupling Point DP Approach Source: Framework developed by author Leagile strategy positions the decoupling point so as to best suit the need for responding to a volatile demand downstream yet providing level scheduling upstream from the marketplace Figure 3.
Mason-Jones et al. Thus, leagility enables cost effectiveness of the upstream chain and high service levels in a volatile marketplace in the downstream chain. Illustration Asian Paints, a leading Indian paint manufacturer has deployed postponement strategy successfully in its emulsion and product category.
Asian Paints offers four emulsion brands and shades in each brand. An emulsion comprises of a 'base' provides functional aspects and a combination of 'strainers' provides required shades. The base accounts for 99 per cent of the final emulsion volume while a wide range of shades is developed using just 10 strainers. The mixing of the base and strainers, also called as 'tinting' is carried out at the various sales points of Asian Paints.
The postponement of tinting operation has not affected economics of scale, reduced the inventory level drastically, decreased delivery period and also reduced forecasting error considerably. Asian paints has been offering vary large number of shades and still maintaining finished goods inventories at 60 per cent of the industry average. As a result Asian paints has increased market share and maintain profitability that is consistently higher than the industry average Shah, Base demand can be forecast on the basis of past history whereby surge demand typically cannot.
Base demand can be met through classic lean procedures to achieve economies of scale whereas surge demand is provided for through more flexible and probably higher cost, processes.
Even though the unit cost of manufacture in local markets will be higher than sourcing in low cost locations, the supply chain advantage can be considerable. Illustration Benetton, a major apparel manufacturer has employed the postponement strategy by re-sequencing the dyeing and knitting operations. Earlier the firm used to dye the yarn and then undertake knitting.
In the fashion business, it is very difficult to predict style and colour. Benetton realized that it could reduce inventories and become more responsive by reversing the dyeing-knitting sequence in a single-colour garment. Hence, Benetton stocked un-dyed garments before the beginning of selling season and dyed it with knitting- dyeing sequence after more information on customer preference was available after the start of selling season.
Even as these three strategies are complementary rather than mutually exclusive, it is likely that each may work better in certain conditions. Christopher and Towill provide set of appropriate conditions for the application of the three hybrid i. For many firms, lean and agile supply chain strategies mean similar styles of management but, in reality, they can be very different. Lean supply chain strategy is required for highly competitive markets while agile supply chain strategy, is most suited for a highly volatile markets.
Although lean and agile strategies are often considered as diametrically opposite ways of thinking, they share a common objective of meeting customer demands at the least cost. The essence of the difference between leanness and agility in terms of the total value provided to the customer is that cost, and hence the sales price, is clearly linked to leanness whilst service level availability is the critical factor calling for agility.
Key to providing agile response by firm is availability of flexibility throughout the supply chain. This is particularly true with products that have short life cycles such as personal electronics gadgets or erratic demand such as fashion apparel , where the risks of obsolescence are high.
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