Reprinted from：Supply Chain Management Column
Excerpted from the best-selling book Supply Chain Management: Solutions for High Cost, High Inventory, Heavy Assets, by Liu Baohong.
The proliferation of product lines, the proliferation of product models, and the unique design of parts have led to a great increase in product complexity.
Complexity is the cost driver: the higher the complexity, the lower the economies of scale, the cost will not be done down, the speed will not do up. If you talk to design about the complexity of the product, the first to lift out the shield is the customer’s diverse needs. Yes, everything we do ends up being more or less tied to the needs of our customers. But here I would like to ask is, the same customer base, the same demand, why some companies are more standardized than competitors?
This shows that in the complexity control, although there are uncontrollable factors, enterprises can still make a difference. A simple example is a screw. No matter which company you go to, ask how many screws you get, and the answers are dozens, hundreds, or even thousands. Is it true that the customer wants so many kinds of screws? The answer is all No. How did all that many screws come about?
Don’t ask you all know: developers designed the slug. Of course, the design will say, 5 cents a screw, even if complex, what is the big deal? This is really layman: don’t look down on the screw.
Here are a few stories I’ve experienced, and you know why there’s no small thing in a big company, and anything could cost us our lives. Let’s start with a small company with hundreds of millions of dollars in revenue. Procurement in the complaint, said the design out of too many non-standard parts. Next to the boss in charge of the design began to fight back, saying that it was the customer’s request, to meet the customer’s needs. The purchasing manager was very excited and asked, where did the hundreds of screws come from? Do customers have to name so many names? The design boss was speechless.
Yes, so many kinds of screws, too many numbers, the amount is very scattered, so that suppliers do consignment, people do not dry. There is also a company, but also hundreds of millions of scale revenue, production vice president mentioned screws on the gas: they have hundreds of screws, some screws difficult to distinguish, production of the wrong material, you have to go back to change, a toss on the big half an hour. That’s fine. In case did not find, the product to the product, the product sent to customers, not a few days, the screw struck off, these millions of equipment stopped there, became a big trouble.
The customer called and said you didn’t even have a screw?! It’s all small companies. Then there’s a big company. Shenzhen has a billion-level home appliance manufacturer, labor costs are rising year after year, the company wants to introduce robots, automation, but difficult. Do you know what a big problem is? Screws!
The company has hundreds of screws, and there is no one on earth who can handle so many screws. It’s all small companies. Then there’s a big company. Shenzhen has a billion-level home appliance manufacturer, labor costs are rising year after year, the company wants to introduce robots, automation, but difficult. Do you know what a big problem is? Screws!
This company has hundreds of screws, this earth is not able to find a robot hand, can deal with so many screws! Screws are used to connect different components and also reflect the standard design level of other components: the more the parts are not designed to be standard, the less standard the screws are, and the lower the design level, the more screws are needed. There is a company’s products are lamps, there is a lamp actually has 54 screws, 11 specifications.
You can imagine what the overall level of design is like. Of course, for screws, the supply chain as an outsider, know can only be regarded as one of the nine cattle hair, also need not continue to guess.
But in any case, it’s a design sin, and the solution has to be designed to prevent it by promoting generalization, modularity, and standardization. In addition, the complexity of the product is like any systemic problem in the enterprise, and then will always see the shadow of performance appraisal. For example, there is a consumer goods company, the designer’s main assessment indicator is the number of graphs.
It’s no wonder that the re-use of components is low – designers are on the basis of the original design each time, a little modification, which becomes a new drawing, followed by a new number, and thus become a supply chain trouble. That is to say, to really control the complexity of the product, it is necessary to take two ways: on the one hand, to take management means, through performance appraisal to solve the “willing or unwilling” problem, on the other hand, to take technical means, through the introduction of basic generalization, modularity and standardization to solve the “can not” problem. With the will and the ability, the complexity of the product can be truly controlled, thus reducing the cost of complexity-driven.