BUS606: Operations and Supply Chain Management

During NPD, designers need to evaluate supply chain processes and decisions (such as logistic channels, the optimal location choice, mode and frequency of transport, inventory levels, and degree of postponement appropriate for the particular product and its life cycle stage) as well as predict and understand product life cycle aspects associated with duration, delivery window, volume, variety, and variability. The product delivery process and a new product introduction must be as seamless as possible so products flow as required by the customer throughout the life cycle. The product and its associated supply chain must match market requirements and value stream objectives in order to best compete. During the introduction stage, the key order winner is the lead time from concept through design availability and capability, which favors a 'design-and-build' strategy. During growth, product availability during the increased demand time period is the order winner and as a result the product moves towards an MRP push-based supply chain. At maturity, the Kanban supply chain becomes the most effective form as cost is the critical order winner. Finally, at decline, as demand decreases, the MRP supply chain becomes relevant, until demand significantly tails off and the 'design-and-build' facility is relevant.

Unfortunately, there is a wide gap between consumer's articulated support of sustainability and disproportionately low levels of actual 'sustainable consumption'. To management this implies that only some consumers may be willing to sacrifice some degree of functional performance for sustainability; products must still meet a minimum threshold of acceptable performance, and it is critical to reassure consumers that the product meets an acceptable minimum level of functional performance. Therefore to promote sustainable products to market segments, it is important to find ways to improve consumer's confidence toward these products. As sustainability importance increases, consumers are increasingly likely, due to an increase in guilt, to choose the sustainable-advantaged product. In a case study, companies with a lack of customer demand for sustainable products found that customers tend to stick to conventional products instead of buying eco-products, even if price, quality, and functionality are the same. Researchers continue to explore the perceived trade-off between product performance and sustainability.

Since consumers often believe there is a trade-off between sustainability and functionality, they tend to choose the product with superior functional performance over the sustainability-superior product until a minimum threshold of functional performance is achieved. The trade-off depends upon the degree to which consumers' value sustainability and is mediated by consumers' feelings of confidence and guilt. Superior aesthetic design has a disproportionately positive effect on the likelihood of sustainability-advantaged (versus performance-advantaged) products due to the effect that superior aesthetic design has on overcoming the potential lack of confidence in sustainable products. Therefore, a key recommendation for company's interested in marketing sustainable products is to develop market-leading product aesthetic design capabilities.

Recently, research on green product innovation activities is growing and includes investigating strategy development, market and environmental performance of green product innovations, and design strategies-such as recycling and remanufacturing. Green NPD is related to market orientation and green company policy as antecedents of product characteristics must be balanced (greenness, relative advantage, costs and newness) and introduction characteristics (green targeting and green positioning) must be established. In turn, these product characteristics determine NPD financial, customer, technological, and reputation outcomes. Other aspects of green NPD include evaluating environmental concerns, design specifications, project team coordination, upper management support, and product outcomes. While reputation may not be a measurable outcome of a green NPD process, managers need to consider both internal and external reputation impact in the NPD process. Methods for addressing specific sustainability issues include: Design for Environment (DfE), design-oriented work for green operations and green supply chain management, and other tools and metrics that can be used to make design decisions more sustainable.

In mature sustainable NPD processes and organizations, sustainability scope and targets are clear and operationalized; customized tools, databases, design for sustainability methods, and supply chain tools are used; sustainability issues are respected in process definitions; roles and responsibilities are defined; and NPD designers have expertise in sustainability and are active in knowledge networks. Management needs to establish specific sustainability targets, such as energy efficiency, carbon dioxide footprint, product weight, materials (recyclables and recycling), sustainable packaging, and hazardous substances. Also, a clear definition of products within product development is needed.

In NPD, each component's economic, environmental and social impact needs to be evaluated. Product designers need training to understand each of the three sustainability environments. Designers need to monitor NPD and costs through all of the NPD phases of idea generation, idea screening, concept development and testing, marketing strategy, business analysis, product development, test marketing, and commercialization, and to realize that as more information is gathered, it is easier to estimate NPD costs.

Case analysis reveals that companies consider greenness to be a product characteristic that must be balanced throughout the entire NPD process against non-green characteristics, such as newness, product costs, and relative advantage. The environmental impact of products occurs across the dimensions of materials, energy, and pollution and needs to include all supply chain management processes including packaging and transportation activities. NPD designers need to incorporate environmentally conscious manufacturing and product recovery into design, material selection, manufacturing processes, product delivery to the consumers, and end-of-life product management. They need to understand the entire life-cycle and impact upon the environment at each of its stages, and incorporate product attributes and manufacturing processes into their design for the environment.

DfE addresses designing and developing recoverable products, which are durable, repeatedly usable, harmlessly recoverable, and environmentally compatible in disposal. Currently, designers are unfamiliar with the associated manufacturing processes, which in turn lead to coordination issues between supply chain members. Research is particularly lacking in the DfE area. In DfE, sustainability attributes including recyclability, energy efficiency, maintainability, and reusability are treated as design objectives rather than constraints. As seen in Table 2, DfE relies on contextual information to select an appropriate DfE strategy and to establish design specifications and requirements. When contextual factors are not well defined, firms may struggle to manage sustainability efforts.

Table 2.

Contextual Factors and Comments (Based upon)

Reverse value chain activities (reuse, repair, refurbishing, recycling, remanufacturing, or redesign of returned products) may create additional competitive advantages. A centralized, efficiency-driven reverse network is not always the most appropriate for re-manufactured goods. When high return rates and recoverable value is high, responsive supply chains focusing on speed through decentralization should be designed. If returned products are unused, consideration to an early product differentiation strategy should be given. Marketing drivers for product re-manufacturability include high production costs for a single-use product, low remanufacturing costs, and low incremental costs to change a single-use product to a remanufactured one. Re-manufacturing valuation, pricing, and design decisions include product/component durability, level of re-manufacturability of products, managing the highly unpredictable return stream, consumer preferences between new and re-manufactured products, supply constraints, extent of cannibalization between new and re-manufactured products, competitors in both markets, efforts to gather re-manufactured products, and the reverse supply network. Management and new product designers must also consider the timing and volume of used product returns, re-manufacturability, diffusion rate, and repeat purchase. Additional NPD must consider which components may be reused for manufacturing products, which components will retain their original functionality, and how many times a component may be reused for the same kind of product.

Extended Producer Responsibility (EPR) policies are being developed to shift responsibility for life-cycle environmental performance toward producers and away from local municipalities through providing incentives to incorporate environmental considerations into the design of products. EPR efforts include product take-back and recovery targets (e.g. home appliance recycling in Japan), disposal fees and material taxes (e.g. states that tax disposal of tires in the US), and design/performance standards (such as fuel efficiency laws in the US). Strategies to encourage EPR that impact upon NPD include changing product design to incorporate end-of-life take back, disassembly and reuse; rationalizing parts and components to decrease material usage, eliminate hazardous substances, and facilitate remanufacturing; and choosing optimal product durability to include planned obsolescence and planned take-backs and replacements. Additionally, EPR considers different contractual arrangements with suppliers and distributors toward joint planning and responsibility over the product life cycle to include reverse supply change structure and remanufacturing. EPR contracts, such as price-replacement interval, two-part tariff, and leasing, can assist in supply chain coordination, improve supply chain profitability and lead to environmentally superior product designs. Existing 'fee-upon–sale' types of e-waste regulation cause manufacturers to increase their equilibrium development time and expenditure; however, existing 'fee-upon-sale" types of e-waste regulation fail to motivate manufacturers to design for recyclability. Contrastingly, 'fee-upon-disposal' types of e-waste regulation (such as individual extended producer responsibility) motivate design for recyclability, but often fail to reduce the new product introduction frequency.

In recent years, environmental protection programs (such as the Title IV of the Acid rain program developed by the EPA in the US, Regional Greenhouse Gas Initiative in the northeast or the Western Climate Initiative in the western US, and the Kyoto Protocol) have been instituted throughout the world to limit and reduce greenhouse gas emissions through 'cap-and-trade' programs. Relative to the discussion here, questions regarding the impact of these programs on sustainable NPD exist. Specific questions that need to be addressed include:

• How do carbon prices affect product line design decisions when different products require different capacities and have different levels of emissions during production?
• How do different regulatory regimes affect a firm's technology choice?

In the future, supply chain members may trade 'emissions' rights within the supply chain to optimize the value chain.