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Discussing Standardization, Component Commonality in A Supply Chain

The document discusses several topics related to supply chain management including standardization, component commonality, product substitution, and inventory management of slow vs. fast moving items. It notes that repair parts are typically slow moving and should be stocked at a central store. Manufacturer driven product substitution can increase profits by allowing aggregation of demand to reduce inventory needs. Component commonality in products allows sharing of components across product lines to reduce the total number of distinct components needed and thereby decrease safety inventory levels. While standardization offers benefits like reduced costs, it also decreases variety and makes systems more vulnerable.

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Malik Yasir
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30 views

Discussing Standardization, Component Commonality in A Supply Chain

The document discusses several topics related to supply chain management including standardization, component commonality, product substitution, and inventory management of slow vs. fast moving items. It notes that repair parts are typically slow moving and should be stocked at a central store. Manufacturer driven product substitution can increase profits by allowing aggregation of demand to reduce inventory needs. Component commonality in products allows sharing of components across product lines to reduce the total number of distinct components needed and thereby decrease safety inventory levels. While standardization offers benefits like reduced costs, it also decreases variety and makes systems more vulnerable.

Uploaded by

Malik Yasir
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Discussing;

STANDARDIZATION,COMPONENT COMMONALITY IN A SUPPLY CHAIN

SLOW VS FAST MOVING


ITEMS

Low demand = Slow moving items, vice versa.


Repair parts are typically slow moving items

Stock slow moving items at a central store

PRODUCT SUBSTITUTION

HIGH LEVEL OF PROD AVAILABILITY WITH LOW


LEVELS OF SAFETY INVENTORIES

Manufacturer driven
Substitute high value product for low value Product (120G)

Customer driven
Milk pack (Half liters)
Substitution>satisfy
demand>agg.inventories>Prod.availability
If products are very similar, why not to eliminate one of
them?
Manufacturer driven one way subs.
Deny the customer orders: Subs. the product.

Manufacturer driven substitution increases overall


profitability for the manufacturer by allowing some
aggregation of demand, which reduces the inventory
requirements for the same level of availability.

COMPONENT COMMONALITY

Dell producing 27 products with 3 components (processor,


memory, hard drive)
No product commonality: A component is used in only 1 product.
27 component versions are required for each component. A total
of 3*27 = 81 distinct components are required.
Component commonality allows for component inventory
aggregation.

VALUE OF COMPONENT COMMONALITY


IN SAFETY INVENTORY REDUCTION

# of products a component is used in


Aggregation provides reduction in total standard deviation.

STANDARDIZATION

Standardization
Extent to which there is an absence of variety in
a product, service or process

The degree of Standardization?


Standardized products are immediately
available to customers
Who wants standardization?
The day we sell standard products is the day we
lose a significant portion of our profit

ADVANTAGES OF STANDARDIZATION

Fewer parts to deal with in inventory & manufacturing


Less costly to fill orders from inventory

Reduced training costs and time


More routine purchasing, handling, and inspection procedures
Opportunities for long production runs, automation
Need for fewer parts justifies increased expenditures on
perfecting designs and improving quality control procedures.

DISADVANTAGES OF STANDARDIZATION

Decreased variety results in less consumer appeal.


Designs may be frozen with too many imperfections remaining.
High cost of design changes increases resistance to improvements
Who likes optimal Keyboards?
Standard systems are more vulnerable to failure
Epidemics: People with non-standard immune system stop the plagues.
Computer security: Computers with non-standard software stop the
dissemination of viruses.
Another reason to stop using Microsoft products!

DOLLAR AUCTION

The dollar auction is a non-zero sum sequential


game designed by economist Martin Shubik to
illustrate a paradox brought about by traditional
rational choice theory in which players with perfect
information in the game are compelled to make an
ultimately irrational decision based completely on a
sequence of rational choices made throughout the
game.[1]
http://en.wikipedia.org/wiki/Dollar_auction

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