Product structure metrics as an indicator of demand-supply chain efficiency : case study in the cellular network industry

Abstract

Product structure affects demand-supply chain performance, this is almost self-evident. But how to develop better product structures? Which design alternative is the best among several options? Markets define the number of product variants needed. Therefore, limiting product variations is not a feasible solution. This research made an effort to develop a method to guide product structure development and to quantify comparison of alternative design implementations. The study aimed at reducing both the operating costs and the asset costs without limiting the customer offering.

This thesis consists of four main parts. First, problem area is reviewed and research methods defined. Second, principles in designing demand-supply chain efficient product structures are discovered, and then operationalized into the product structure metrics to measure how well the design principles are met in a given product. Third, the metrics' usefulness is verified through applying them to eleven products from the cellular network industry. Fourth, the product structure metrics are validated by simulation models measuring operating cost and inventory value, and by following real products in their day-to-day business operations.

Based on the research results, the design metrics are suggested as a useful tool to predict new product structures' implications for demand-supply chain cost efficiency. The number of physical modules, dependency index and commonality index guide new product development to reduce operative and asset costs in the demand-supply chain over the life cycle of a new product. The new metrics combine several product-related factors that drive demand-supply chain efficiency, resulting in a new kind of quantification of product structure goodness in terms of demand-supply chain efficiency.