Logistics Challenge of
Customisation
Janny Leung
Systems Engineering & Engineering Management Department
The Chinese University of Hong Kong
The Evolution of Marketing
The new 4 P's'
Product -
the essence of what we offer the
customer
Processes -
system and activities that support
provision of the core product or
services
Performance - do we get it right? Have we live up with
our promises?
People -
interaction with employees: make or
break!
Changing Customer Expectations
Shortening product life cycles
Higher service requirements
Global market -- segmentation
Product proliferation
multi-stage, multi-vendor production
global transportation logistics
demand
cost
leadtime
Product variety is increasing
Crest toothpaste have 35 options
(flavors and package sizes)
HP workstations have 500,000
options (RAM cards, video cards,
graphic cards, monitors, disk drives,
etc..)
GM cars have 20,000,000 versions
(color, interior combinations, drive train
configurations, and option choices)
Supply Chain Management -- Christopher Tang
Pitfalls of increasing product variety
 Demand
may not increase -- (Quelch &
Kenny, HBR 1994)
 total demand spread over more SKUs
 reduced product life cycle
 Forecasting nightmare
 High manufacturing cost
 High inventory cost
 Poor availability of product to customers
 High product support and service costs
 “Mark-down” sales at the end of product life
Supply Chain Management -- Christopher Tang
Postponement: A Strategy for managing
product variety in Global Market
Postponement: Delaying the “point of
product differentiation”
Two types of postponement
Logistic postponement: moving
customization point to closer to customers
Form postponement: delaying
differentiation point by standardizing parts,
products and processes
Supply Chain Management -- Christopher Tang
HP公司各種打印機
香港中大-清华第三届供应链管理高层经理研修班
香港 2002年11月
HP – Universal Power Supply
A new network printer for world-wide
distribution
110V and 220V power supply for North
American and European markets
Long lead time from engine
manufacturing (by Japanese partner) to
printer customers
High regional split forecast error !
Hau Lee
負相關减低波動
負相關
香港中大-清华第三届供应链管理高层经理研修班
香港 2002年11月
Form Postponement at HP DeskJet Printers
 Standardization
-- Mono/Color Printer
Mono Printer
Color Printer
PCA
FA&T
Customization
No Delayed Product Differentiation
Mono Printer
PCA
FA&T
Color Printer
Customization
With Delayed Product Differentiation
•Cost -- Additional materials
•Benefit -- Lower Inv.. and Higher Service Level
Supply Chain Management -- Christopher Tang
Logistics Postponement:
Impact on Distribution System
30 =
10
+ 10
17
+ 10
DC
A
B
C
100
100
100
A
B
C
100
100
100
Advantages of Postponement
Lower inventory cost
Improved product availability (better
customer service)
Lower burden on forecasting
especially during ramp-up and end-of-life
Lower reconfiguration costs for transshipment
Lower obsolescence and write-offs
Higher design, manufacturing/material costs
Logistics Challenges to
Automotive Industry?
Thank you