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Becoming competitive through design for manufacturing.

Becoming Competitive Through Design for Manufacturing

Competitive advantage can be established through the use of design for manufacturing. Design for manufacturing contributes to competitive success by matching product demands to manufacturing capability. In so doing, design for manufacturing, or DFM, can create short-run competitive advantage through establishing either a low cost or differentiation position in the marketplace for a firm. Even more critically, DFM has the capacity to make that competitive advantage long-lasting by shifting production processes and market linkages.

Design for manufacturing may have many meanings. Implicit in any concept of DFM is the notion that product designs make demands upon manufacturing capability. At the simplest level, design for manufacturing means making a product design manufacturable. |This is most commonly operationalized by providing the design function with lists of approved suppliers, materials, engineering tolerances, and other manufacturing details from which they may choose in creating a design. In addition, there is usually some sort of sign off or design review by manufacturing before a design is finalized. In this view of design for manufacturing, manufacturing tells design, "here's what we know how to do, design something that fits our existing set up and skills."

A more complex interpretation of design for manufacturing may mean creating a product design which meets market preferences, enhances manufacturing learning, and creates superior firm performance. This approach to design for manufacturing may be operationalized by adding a new piece to the design process in which manufacturing is actively involved from the start of design conceptualization, suggesting opportunities the design concept might exploit as a result of manufacturing resources. In this view, manufacturing tells design, "lets think about how we can blend what we know how to do with what you'd like to see done, figure out what needs to be adapted or learned, and bring it to life." In the second view of design for manufacturing, manufacturing's role in the design process is that or a broadening participant rather than a constraining signatory.

Design for manufacturing can contribute to short-term competitive advantage by serving as the basis for a differentiation or low cost position in the marketplace. DFM can provide differentiation through speed of delivery, quality, and variety in combination with the former two. The Ford Taurus story is a well known example of how design for manufacturing allowed the company to speedily deliver their new product in the face of an onslaught of demand. of course, the car's design concept is also a part of the differentiation position the Taurus created for Ford but the design would be useless without the quality built into it and the factory's ability to deliver it on demand.

Quality and reliability became a differentiating sales point for Plus' Hardcard hard disk product after an intensive design for manufacturing process. Reliability is a critical characteristic in mass storage products. |The miniaturized Hardcard hard disk allowed the company to open a new market area successfully because reliability was built in through the design for manufacturing process. Further, the parallel nature of Plus design for manufacturing development process provided first mover advantages to Plus in that the product was on the market sooner, with high quality and high volume; a similar product was introduced by a competitor within two months. In no less of an assembly-line situation, McDonald's is capable of providing variety, speedy delivery and quality simultaneously, giving it a pre-eminent position in the fast food industry. Each new product introduced by the company is developed with the operation in mind -- not just in terms of whether the new food can be prepared in a typical McDonald's operation but in terms of the impact that new food and its requisite preparation will have on other products preparation and delivery. Design for manufacturing can contribute to differentiated competitive advantage in service and goods industries alike.

Design for manufacturing can contribute to a low cost position by reducing scrap and rework, creating efficiencies in purchasing, assembly and inventory, and by allowing a firm to move down the learning curve faster. For example, take the simple design for manufacturing approach of creating designs in which the number of screws is minimized and those screws which can't be eliminated are of a standard size. In such a product, parts are snapped together rather than screwed together, requiring less eye-hand coordination and thus speeding assembly time; perhaps that step in the assembly process can be automated, speeding the process even further. Labor savings can thus be achieved. Further, the absence of screws means that there is no possibility of' them being dropped inside the product or the product not receiving all of its screws. Both of these cases would result in scrap or rework, the cost of which is eliminated through design for manufacturing. Suppose there are still a few screws which are necessary for product assembly. By standardizing the size of the screw--and eliminating the others--purchasing and inventory are each made more efficient. Also, workers can become more skillful at assembly since the same screw and driver are used throughout the product; labor savings may accrue.

Increasing the efficiency of manufacture through design for manufacturing will allow a firm to gain learning curve effects sooner. The product should be able to be produced at full volume levels faster than those of competitors while maintaining quality and delivery speed. Further, design for manufacturing may actually allow a firm to begin product ramp up earlier than competitors since the traditional cycle of pilot run, design and factory adjustment, another pilot run, re-evaluation may be eliminated. As a result, not only may the new product move down the learning curve at a faster pace but it may begin its Journey at an earlier point in time. This may give a firm a significant low cost position advantage.

Design for manufacturing can provide a more lasting competitive advantage by aiding in the refinement or shift of production systems and market linkages. For example, in early 19th century America, the desire to produce a standard issue rifle for military purposes led to a rifle designed with its production in mind. As a result, the number of parts was reduced and remaining parts were standardized. This made the rifle not only easy for the soldier to use and clean, but easy to assemble in the factory. In fact, this new design for manufacturing enabled the production process to move out of the craft, job shop model for production to a mechanized line flow operation. A shift in production systems had occurred and with it a change in the logic of the rifle industry. More commonly, however, design for manufacturing may simply refine the existing production process, providing the opportunity for competitive advantage through either cost leadership or differentiation as discussed above.

The accepted design concept or delivery system--may also be refined or shifted through design for manufacturing. In the financial services industry, for example, the design of the 24-hour cash availability product was developed with its production process, namely the customer interfacing with a cash machine, in mind. Careful attention to the service environment, the friendliness of software, and particularly to back room systems was required in order to successfully offer the product. In this example, both the accepted design concept--cash access within limited banking hours--and the delivery system--filling out a form, standing in line, interacting with a teller and receiving the cash--were dramatically shifted. Competitive logic in the financial services industry shifted to reflect the new design and those institutions with a 24-hour cash availability product obtained a competitive advantage.

The case of a new computer terminal product provides an illustration of how design for manufacturing can create competitive advantage. In this case, short-run advantage was gained through achieving a low cost position while longer-run advantages were established by shifting market linkages to some extent.

The "Sapphire" terminal was a display workstation developed by a major computer maker. In late 1978, market research indicated increased sensitivity to the price of terminals. As the price of computers had begun to decrease, and the number of terminals purchased by a customer had begun to increase, terminals represented a significant portion of total computer system cost. In a sense, terminals were no longer thought of as a capital investment, rather, as an expense; something else to be provided to an employee along with a desk, pencils and a lamp. In this environment, the company began to see a drop in its market share of terminals connected to their computer system ports. End users were beginning to purchase cheaper terminals which emulated the company's data communication protocols. It was clear that the company would have to add a low-end terminal to its product offerings to regain and protect its captive market share of terminals.

With this goal in mind, a new product project was launched which incorporated design for manufacturing. The belief was that design for manufacturing would allow the company to achieve a low cost high volume terminal product. Although Sapphire was to be a high volume minimum 8, DOG per month) terminal it was designed for launch in a factory which was not truly a high volume operation (the only other product produced at close to the targeted level was produced at a maximum of 6,000 per month). Nonetheless, the situational response system in the factory was fairly responsive and the factory's existing competence was seen by management as dynamic.

To promote design for manufacturing, an interdisciplinary development team was formed. Their development approach was often called the "interactive approach" by team members because of its inclusion of the manufacturing group -- both materials/procurement people and production engineering--and because of the iterative decision-making process. Two examples of this approach will serve as clarification.

First, during the breadboard stage of Sapphire's development the new product team decided it would be desirable to automatically insert all components on the terminal's printed circuit boards. The automatic insertion area of the factory was consulted and guidelines for appropriate design were obtained, e.g. size of the boards, size of holes, distance between components, and components which the equipment could handle. As a result, all printed circuit board layouts were compatible with the auto-insertion equipment. A second example of the design for manufacturing approach has to do with new suppliers. The choice of new suppliers was made jointly by design and procurement through the following process: The design engineers would ask the materials engineering area for information as to which suppliers could help solve a technical problem. Working from the information supplied by materials engineering, design would narrow down the list after assessing each supplier's technical competence. If the list had suppliers on it with which the company had not previously done business then procurement would assess them according to company standards. After this back and forth procedure, design and procurement would discuss the merits of each supplier and jointly decide on which vendors to use and how many sources of a new material were needed. In a similar manner to these two examples, design for manufacturing was incorporated in all aspects of the terminal's development and design concept.

The Sapphire terminal had a novel product concept--a low price high performance terminal--whose development through design for manufacturing led to a smashing success for the company. Compared with other terminals the company manufactured, manufacturing cost was reduced by nearly fifty percent and the number of parts was reduced from 575 to 370, with twenty-two fewer integrated circuits. More importantly, very few problems were encountered in Sapphire's manufacture despite the most accelerated and high volume ramp-up ever made in its factory. Quality and reliability targets were achieved quickly and little disruption of other products in the factory occurred. Thus, total cost were dramatically reduced and a low cost position was achieved for Sapphire.

Sapphire added an additional thirty-one percent increase to units sold by its division in the year of its introduction, even though it was only shipped for the last three months of the year. Also, despite Sapphire price being about half that of other terminals, annual dollar volume was almost the same from the year it was introduced to the previous year.

The Sapphire product turned out to be one of the highest volume products in the company"s history. Its competitive impact was also impressive. The company's terminal market share rebounded at the expense of competitors. The market was enthusiastic about the concept of getting high performance for a low price; even though the price was not at the rock bottom of the industry's offerings. A shift in market perceptions and preferences had occurred, making it harder for the "dumb" terminal makers and securing the computer maker's competitive position. Thus design for manufacturing led both to a short-run low cost competitive advantage and a longer term gain by shifting market linkages.

Design for manufacturing can play a valuable role in establishing both short-run and longer lasting competitive advantage for firms. Many and varied benefits accrue to those firms which work to integrate the design and manufacturing functions. Costs may decrease, quality may go up, new production methods may be found, new design opportunities may be uncovered. Design for manufacturing can help companies define their low cost or differentiation positions in the industry. It may even shape the industry's long-run logic by affecting production systems and market linkages. What remains is for companies to embrace design for manufacturing and perfect its implementation within their own organizations.

Nan S. Langowitz is Assistant Professor of Operations and Strategic Management at the Wallace E. Carroll School of Management at Boston College. She holds the DBA from Harvard University in production and operations management.
COPYRIGHT 1991 Institute of Industrial Engineers, Inc. (IIE)
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Langowitz, Nan
Publication:Industrial Management
Date:Jul 1, 1991
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