Companies that sell into demand-driven industries are
often at a loss to explain how they can speed up their product to market lead
times, and yet still deliver what is considered a custom-made finished good. In this case, we’re referring to companies that manufacture or assemble
customer specific products. However, despite the fact that the finished good
must be customized, manufacturers can deliver a “one of a kind” product and still shorten their overall turn times. So, how is this possible?
Pre-manufacturing is the key to this entire process. Now, this doesn’t mean your company should manufacture the entire product and then go to market looking for customers. This simply won’t work, especially for customers looking for a unique offering. Instead, it means you pre-manufacture the majority of your product and leave the remaining portion to be decided upon by your customer. In essence, manufacture the majority of the overall assembly (70%) and then allow your customers to decide upon the remaining portion (30%) of the finished good.
Your customer still receives a customized finished good, while you shorten the time it takes to deliver that good to your customer. Who uses this type of approach? Well, Dell is one company that pioneered this type of demand-driven philosophy. In this case, the company’s strategy is both a unique approach to supply chain management, and an order fulfillment approach, one that allows them to deliver customized assemblies much faster than simply starting from scratch.
Whereas manufacturers using Just in Time (JIT) rely upon a fixed bill of materials, companies emulating Dell’s approach can essentially combine a semi-fixed bill of materials (BOM) and a fixed bill of materials. The fixed portion is the pre-manufactured portion. The semi-fixed portion is that remaining part of the product that is decided upon by the customer.
The video and table below are from the post: Supply Chain Management: Inventory Holding Costs in Dell’s Push-Pull
You Must Control the Customizable Options
In order for this entire approach to work, you must be willing to control the customizable options. Your customers still have a choice, but you control those choices through your semi-fixed BOM. This is the only way to guarantee you are able to provide the finished good within an acceptable time frame.
Pre-manufacturing allows you to shorten the time it takes to provide your customers with a customized finished good. Even if you’re only able to pre-manufacture a small portion of the assembly, it’s still better than starting from scratch and struggling with a much longer lead time. You’ll see this type of approach with manufacturers who use production cell layouts, ones where individual work cells manufacture portions of the overall assembly. Next, the semi-finished goods are returned to inventory and pulled upon request. It’s a simple approach and one that a number of companies use to great effect.
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