Aligning demand and supply flexibility in custom product co-design |
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Authors: | Songlin Chen and Mitchell M Tseng |
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Affiliation: | (1) Advanced Manufacturing Institute, Department of Industrial Engineering and Logistics Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong |
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Abstract: | Flexibility of supply and demand is essential for successful implementation of a mass customization strategy that delivers
sustained competitive advantage. Supply flexibility, i.e., a choice of alternative products designed to perform the same basic
function, is made possible by the range of capabilities available in flexible and agile manufacturing systems and in supply
chains. Demand flexibility is derived from the degree to which a customer is willing to compromise on product features or
performance levels in order to meet budgetary (reflected in price) or schedule (reflected in delivery) constraints. Flexibility
of both supply and demand can have significant strategic and financial value if they are properly aligned. However, customers
are mostly unaware of mapping of demand flexibility on to supply flexibility and its impact on production cost and time. Recent
advances in information technology have made it possible to co-design a product that involves customer on one end and the
manufacturer on the other. This creates an aura and an opportunity where a middle ground between the supply and demand flexibility
can be explored and a “deal” can be struck where both parties settle for a product that is beneficial to both through a negotiated
settlement. In this paper, we develop a framework for such negotiations. The customer requirements are treated as a range
of negotiable options instead of a set of fixed inputs. Demand and supply for customization is then matched by aligning the
flexibility of manufacturing systems with customers’ requirement options. Based on this framework, a negotiation scheme is
developed to assist customers and manufacturers in exploring and utilizing demand and supply flexibility information in co-design.
The negotiation scheme is formulated using goal programming. Finally, an interactive problem-solving procedure is developed
and implemented with an illustrative example.
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Keywords: | Flexibility Mass customization Co-design Negotiation |
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