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SUBJECT: Strategy Implementation -- Product Diversity Plan

ALPHANUMERIC IDENTIFIER: Supplied by Instructor (leave space for)

BRIEF DESCRIPTION: The product diversity plan is the strategy the plant manager will employ to reengineer his manufacturing process to allow a much greater variety of different products to be made while retaining mass production cast advantages.

KEYWORDS: Manufacturing, order direct, diversity, mass, customization

OVERVIEW:

Product customization is a service that has always been demanded by consumers. Traditionally it has been expensive and available only to customers willing to pay a significant premium over the price of a mass manufactured item. Today companies are developing a strong market advantage over their competition by adopting a strategy of mass customization and postponement. Mass Customization is the process of building common subassemblies, then finally configuring product to the specific customer order. Postponement is the process of delaying final configuration of products until a customer order has been accepted. The successful deployment of mass customization is dependant on the product diversity plan. This is the method the operations manager will use to shift production from a few standardized items to an almost unlimited number of possible products.

Dell Computer has grown from one man’s garage into a global powerhouse by employing a strategy that has been as revolutionary and effective today as Henry Ford’s production line was in the early part of this century. Dell builds an almost infinite range of different products to its customers exact specifications in the U.S., and does it for less than competitors who employ mass manufacturing in cheap labor countries. This strategy has slashed costs by eliminating the inventories of quickly obsolete components that plagues the computer assembly industry. Dell’s widely vaunted statistic is that the customer pays Dell for the computer before Dell pays its suppliers for the components, resulting in positive working capital. Customers have responded to the value proposition of a cheep, customized product in overwhelming numbers, making Dell along with Microsoft and Intel one of the new "big three" of the information age.

The basic benefits of Mass Customization and Postponement to the manufacturing process are:

1. Cost savings through lower investment in inventory.
2. Improved product cycle time.
3. Elimination of excess and obsolete materials
4. High degree of flexibility and fast response to changes in the marketplace

A basic product diversity plan involves redesigning the existing production process along JIT and lean manufacturing principals. Individual components and subassemblies are supplied in bulk from suppliers and are combined in various relationships to form the end products. Almost every best practice in manufacturing needs to be successfully employed as part of a product diversity plan. Critical areas are:

1. Reducing setup times for key machines
2. Reducing cycle time through the facility by chunking
3. Implementing flexible scheduling through the application information technology and EDI
4. Inventory reduction
5. Shifting responsibility for quality to suppliers

Based on recent implementations, plant managers have identified 10 commonly overlooked best practices to incorporate intro a product diversification plan to aid a trouble free mass customization implementation.

1. Set correct expectations and communicate these expectations to the Mass Customization team.
2. Make sure that the equipment, process, and materials work successfully together before production is initiated.
3. Plan for the future, the equipment used to make today's products should be capable of handing future products.
4. Develop a thorough, standard quality system for the entire project. Make data collection and reporting simple.
5. Place Product Engineering near the production lines. This allows for fast corrections to the process.
6. Develop a plan for shipment holds or the rework of products.
7. Plan for extra room and dock doors for the disposal and recycling of materials.
8. Plan for packaging and dunnage during the start-up operations.
9. Plan a small safety stock of every part used in the product. Otherwise, you will end with unshippable product waiting for insignificant parts.
10. Determine if the production environment is suited for distribution and production. Physical characteristics of the building such as ceiling height, air conditioning, dust and noise must be planned.

REFERENCES:

• Direct From Dell: Strategies That Revolutionized an Industry. Michael Dell & Catherine Fredman. Harper Business. 1999.
• Mass Customization: The New Frontier in Business Competition, Joseph Pine (1993).
• Customers Drive Desires Home: How to Synchronize When Mass Customization Comes Home to Roost. Intelligent Manufacturing, June 1995.
• Let Customers Have it Their Way. Manufacturing Systems. Datamation, April 1995.
• Effects of International Diversity and Product Diversity on he Performance of Multinational Firms. Academy of Management Journal, 1996 Vol. 39 Issue1.
• Sequencing Jobs and Allocating Buffers in a Flowshop Environment. Karunakaran & Norman – University of Pittsburgh.

ACKNOWLEDGEMENT: This is a March 29, 1999 revision by Gene Goodson of an assignment for OM742 contributed by XXX Reid.