Integrating product design and supply chain management is a challenging process, but can reap rewards, reducing risks and boosting profitability.
That’s according to Omera Khan, professor of supply chain management at Royal Holloway, University of London, who has been on a long and determined quest to promote greater alignment of these functions.
Professor Khan first identified the problem when working with large companies almost 20 years ago. At the time, the professor says, many organisations disapproved of integration because they were stuck in a silo mentality, with little communication between departments. Undeterred, she continued researching the concept and has now written a book – “Product Design and the Supply Chain: Competing Through Design” – which marks the culmination of nearly two decades of work in the area.
Over the years, some companies have begun to recognise these issues as they look to address the increased complexity of their supply chains caused by globalisation and the rise of e‑commerce. However, too many still use a blinkered approach to design: this has led to products that are attractive to customers, but risky and costly to supply, eroding profitability, says Professor Khan.
One pioneer is aircraft manufacturer Boeing, which saw the problems of a linear product development approach – starting with designers, before passing to marketing, engineers, suppliers, then manufacturers – as early as the late 1980s. By transforming to a concurrent, cross-functional process for versions of its 777 range, it has avoided many of the supply chain issues common to linear methods, such as ill-fitting parts and delivery delays. This has contributed to the 777’s reputation as one of the most successful aircraft ever made.
Another example is fashion retailer Zara. The company employs a process called constrained design, in which designers only use fabrics the company has already committed to buying. The result is a significant reduction in supply chain risk and the ability to deliver on-trend products to its stores across the world just 15 days after design.
Maureen O’Shea, associate partner at professional services firm EY, agrees that design processes are becoming more integrated, taking issues such as sustainability, supply chain risk, and manufacturability into account.
“Responsible organisations now have checklists to ensure, for example, that their designs use no conflict minerals, and all suppliers are audited carefully for safe working practices,” she says. “These checks avoid costly and challenging redesigns later.”
Recent research by management consultancy Bain & Company has added some much-needed empirical support, showing that a cross-functional design process cuts costs by 38 per cent compared to a single-function process. It achieves this by controlling a larger share of the costs of supply, says the consultant.
Another important way to reduce supply chain risk through design is so-called modularity, says Peter Guarraia, partner at Bain & Company. For example, using undyed fabrics that can be dyed at the last stage in production – another technique used by Zara – adds flexibility to respond to fashion trends quickly, while cutting supply chain complexity.
“Also, electronics packages are increasingly modularised, standardised and software-configurable,” Mr Guarraia says. “For example, a manufacturer has reduced the types of washing machine motors it uses from 40 to three. It simply configures the software that controls those motors to create different iterations, reducing complexity and supply risk dramatically.”
But does integration create a more resilient supply chain, or can it risk a weak compromise? Mr Guarraia warns of a danger of designing out distinctiveness – you still need a design that wows the customers and differentiates the product, he says.
Professor Khan says some companies have failed in their integration attempts. However, this is mainly because they did not integrate enough, rather than any fundamental flaw in the concept. Integration often involves a major cultural and organisational transformation, which creates significant challenges and can add costs initially. But it is worth it to reduce risk and increase supply chain flexibility in the long term, she says.
Companies are grappling with these challenges right now and momentum towards integration is building, adds Professor Khan. Given the transformations required to compete in an increasingly uncertain world, it is a crucial and timely trend.#Supply Chains