Integrating New Product Design into Supply Chain

The need to offer higher variety to end customers is leading enterprises to design larger number of finished products. With customers expecting shorter conceive to commercialize times, the Design department is under continuous stress to keep the idea to commercialize life cycle to its shortest. Under those circumstances, ideally speaking, if Design department has re-utilizable knowledge assets, it is of great help. Every design doesn't need to start from scratch. This being implied in organizations, Design department has its own knowledge assets which it refers to for designing the product. What needs to be further emphasized is the integration of Supply Chain knowledge assets can be the only source for the enterprise to successfully commercialize the product over its life cycle. Else, typically what is observed is that Supply constraints in the growth stage of product create a bottleneck to achieve the full sales potential of the product. During that stage, unfortunately, the Supply side is under stress (for majorly no fault of theirs) to meet the demand side requirements with a product which has a Supply constrained market. 

As I see during my engagements, I observe that a lot of Supply Chains are turning out to be "A" Supply Chains. In an organisation, where Design department creates design for a end product which needs inputs different from the inputs required for another product such that the common input items between two finished products are minimal, it crates a "A" Supply Chain. In simple terms, increased input variety to produce increased Finished good variety. Ideally an organisation may wish for "V" Supply Chain or "H" Supply Chain. "A" Supply Chains is a result of Design department not appreciative of impact of design on company performance. With increased input variety it creates multiple Supply Chain challenges. Higher input variety means increased number of items in Stores, increases the overhead cost for the organisation. Higher variety may also mean less volume per item which leads to purchasing constraints as suppliers may not oblige with low quantity supplies, which in turn may lead to increased inventory. At some stage this inventory becomes non slow moving or dead which leads a tremendous financial loss. I had an opportunity to work with a client, where a multi crore rupee product assembly was held back due to non availability of a "C" class item not worth over a few thousand rupees. The root cause of that non availability was that the quantity required was 15 units while the Supplier had a MOQ of 1,000 units. Question was why was the "C" class item having a Supply constraint? What was discovered was even being such a small value item, the design department had customized it hence the Supply Chain had a self induced monopoly. The item didn't create any specific USP for the end product nor was is "Vital" item from the quality perspective but the design department had followed some design standards which were not integrated with the Supply Chain at the design stage. This lack of integration led to revenue loss for this particular organisation.

Integration of Design into Logistics is extremly important going forward. How would the product be handled during it flow till it reaches the customer is a very important element. I had a case where one organisation, which naturally focused on product quality when the product got dispatched from the Supplier, found that the material was damaged during transit. So when the design department focuses on BOM or BOQ, it equally needs to focus on Bill of Packaging. 

With 3D printing, assembly at the Channel partners, shorter time to market and more importantly higher variety with lesser increase in inputs being a  reality sooner than later, organizations need to kick start an integration of Design team with the Supply Chain (which includes not only Logistics but also Purchase and Production apart from Strategic Sourcing). This will help improve on Time, Life Cycle cost, Quality & more importantly Service to the end customer.