Product Design Strategy with Commonality by Considering Customer-Choice Behavior in Supply Chain

2015 ◽  
Vol 32 (05) ◽  
pp. 1550037 ◽  
Author(s):  
Xuemei Zhang ◽  
Yao Wei ◽  
Jiqiong Liu ◽  
Gang Chen
Keyword(s):  
Supply Chain ◽  
Product Design ◽  
Choice Behavior ◽  
Design Strategy ◽  
Theoretical Research ◽  
Manufacturing Cost ◽  
Customer Choice ◽  
Common Component ◽  
Optimal Product Design ◽  
Customer Choice Behavior

Product design decisions have significant impact on a firm's competitive edge. This paper investigates the condition under which component commonality is a profitable product design strategy for a firm by considering customer-choice behavior in the supply chain environment. The design configuration with commonality can lower manufacturing cost, but it also reduces product differentiation and revenue. While the customer-choice behavior with utility maximization will impact the retailer's product pricing, we analyze a stylized model of the manufacturer who designs a product family consisting of two products for two market segments with different valuations of quality. By explicitly considering the interrelationship between customer's utility and retail price, we find that commonality strategy is conditionally profitable. Theoretical research reveals that the optimal product design strategy depends on the marginal valuations of customer-choice behavior and the cost-coefficient of the common component determined by the supplier. An example is used to illustrate how some supply chain parameters impact the optimal product design strategy.

Aligning Product Design with the Supply Chain

2010 ◽  
pp. 184-210
Author(s):  
Omera Khan ◽  
Alessandro Creazza
Keyword(s):  
Supply Chain ◽  
Product Design ◽  
Value Chain ◽  
Design Strategy ◽  
Risk Profile ◽  
Decision Makers ◽  
Supply Chain Risk ◽  
Design Decisions ◽  
Chain Management ◽  
Drawing Board

The continued rise in global sourcing and manufacturing has significantly extended supply chains for many companies and has added to their complexity, often implying business fragmentation and virtualization, and thus increase supply chain risk. At the same time, there is now a growing realization that the supply chain ‘begins on the drawing board’; meaning that design decisions can dramatically impact the risk profile of the business. Historically, most organizations have been functional in their structure with responsibility for each stage in the value chain, including design being separate from the other. In today’s challenging markets these ‘silo’ type structures have been found wanting as typically they are not capable of rapid response to fast-changing requirements. This paper is focused on the need to bring design into the heart of supply chain management to achieve a more responsive - and hence competitive - organization. Thus, the primary purpose of this paper is to propose that one of the ways to achieve a more responsive and resilient enterprise is by better aligning product design with the supply chain and hence developing a concurrent design strategy. The recommendations suggest ways in which managers and key decision makers can adopt a more ‘design centric’ approach to their supply chain, which has been shown to enhance the resilience and responsiveness of a firm.

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