The Life Cycle of Manufacturing Networks in the Mass Customisation Era
Read this article. The research focuses on network design performance in our current era of product customization and personalization. With online order volume steadily increasing, what network design considerations do you feel are necessary to successfully fulfill custom orders?
Manufacturing networks life cycle and mass customisation
In this section, the recent advances and the challenges presented during the life cycle of a manufacturing network are discussed. A typical modern manufacturing network is composed of cooperating original equipment manufacturer (OEM) plants, suppliers, distribution centres, and dealers that produce and deliver final products to the market. The topics discussed include supplier selection, supply chain coordination, initial network configuration, manufacturing network complexity, inventory management, capacity planning, warehousing, lot sizing, ICT support tools, and dynamic process planning, monitoring, and control. These topics are in line with the life cycle phases of a manufacturing network (Fig. 5).
Fig. 5 Manufacturing network life cycle
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/05.jpeg)
Supplier selection
The building blocks of any manufacturing network are the cooperating companies. The significance of the selection of these stakeholders (supplier, vendors) has been indicated as early as in 1966 is known as the supplier selection problem. This decision-making problem is highly challenging since it goes beyond simple comparison of component prices from different suppliers. It is often decomposed into sub-problems of manageable complexity, such as formulation of criteria for the selection, qualification of partners, final selection, and feedback verification. In Fig. 6, the decomposition of the supplier selection problem into small more manageable problems is presented, together with indicative methods for solving these sub-problems.
Fig. 6 Supplier selection problem, its decomposition into small more manageable problems, and indicative methods for solving them
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/06.jpeg)
The
supplier selection problem becomes even more complicated in the era of
MC since a certain level of adaptability and robustness is necessary
when operating within a volatile and rapidly changing environment. The
most commonly used criteria in supplier selection studies include
quality and performance. However, when having to deal with
unpredictability and fluctuating demand, which are common in MC,
additional factors need to be considered such as management
compatibility, transparency of operations, strategic direction,
reliability, and agility. While trying to adhere to
eco-friendliness directives, frameworks
incorporate environmental footprint criteria to green supply chain
design. Moreover, several other criteria may be relevant according to
the design and planning objectives of a niche supply chain, which could
be identified using data mining methods.
The Internet and
web-based platforms are used in recent years in order to counterbalance
uncertainty, monitor altering parameters (e.g. weather in supply
routes), and proactively adapt to changes. Moreover, several
proposed supplier selection models incorporate the relative importance
of the supplier selection factors depending on the types of targeted MC
implementation, e.g. for the component-sharing modularity type of MC,
the requirements for selecting suppliers would not be the same as the
component-sweeping modularity implementation type. Like in the case
of a stable low variety production, the analytic hierarchy process
(AHP) is commonly used as a means to solve the multi-criteria
decision-making problem of supplier selection. Incorporating uncertain
information about the real world, essentially extending the
Dempster–Shafer theory, the D-AHP method for
solving the supplier selection problem. The suggested D numbers
preference relation encapsulates the advantages of fuzziness and handles
possible incomplete and imprecise information, which is common in
human-driven systems such as supply chains. Similarly, a combined
analytic hierarchy process - quality function deployment (AHP–QFD)
framework that handles uncertain information,
selects suppliers, and allocates orders to them. A multi-criteria
decision-making method to support the identification of
business-to-business (B2B) collaboration schemes, especially for
supplier selection.
Supply chain coordination
The
literature on organisational knowledge creation points out that
"coordination" plays an important role in combining knowledge from
stakeholders, while it also mediates the relationship between
product modularity and MC. A report on coordination mechanisms for
supply chains.
Concerning coordination in
supply chains, in general, two topologies are studied, namely the
centralised and the decentralised one (Fig. 7). In the first, the
coordination decisions are taken by a central body, often the leading
supply chain OEM, whereas in the second, each member independently makes
its own operational decisions. The decentralised topology has been
proven to improve the performance in the context of MC. A
supply chain that is commissioned to provide a variety of customised
products requires a total systems approach to managing the entire flow
of information, materials, and services in fulfilling customer demand. Further incentives have to be provided to the members, so as to
entice their cooperation through the distribution of the benefits of the
coordination for instance.
Fig. 7 Centralised and
decentralised supply chain topologies. In a centralised topology,
material and information move only downstream. In the decentralised one,
material/information can be transferred both upstream and downstream to
better serve customisation, personalisation, and/or regionalisation
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/07.jpeg)
The
need for adaptation to the new MC requirements has led to the
definition of a novel framework for autonomous logistics processes. The
concept of autonomous control "describes processes of decentralised
decision-making in heterarchical structures, and it presumes interacting
elements in non-deterministic systems, and possess the capability and
possibility to render decisions independently". However, regardless
the topology, the alignment of the objectives of the different
collaborating organisations in order to successfully carry out projects,
optimise system performance, and achieve mutual profits is
indispensable. While an action plan suffices for the coordination
of a centralised supply chain, it is inadequate with a decentralised one since entities tend to exhibit opportunistic behaviour.
Nevertheless, in terms of overall network performance, decentralised
topologies have shown great benefits for serving the mass customisation
paradigm.
Initial manufacturing network configuration
The initial manufacturing network configuration must consider the long-term needs of cooperation and often determines its success. In a constantly changing environment, the configuration of the manufacturing network must be, therefore, flexible and adaptable to external forces. The problem has been extensively addressed in the literature using approaches classified in two main categories, namely approximation (artificial intelligence, evolutionary computation, genetic algorithms, tabu search, ant colony optimisation, simulated annealing, heuristics, etc.) and optimisation techniques (enumerative methods, Lagrangian relaxation, linear/nonlinear integer programming, decomposition methods, etc.) and their hybrids (Fig. 8). Focusing on agile supply chains, a hybrid analytic network process mixed-integer programming model with uttermost aim the fast reaction to customer demands. Fuzzy mathematical programming techniques have been employed to address the planning problems for multi-period, multi-product supply chains. A coloured Petri Nets approach for providing modelling support to the supply chain configuration issue. A dynamic optimisation mathematical model for multi-objective decision-making for manufacturing networks that operated in a MC environment.
Fig. 8 Issues to be considered during the initial manufacturing network configuration and indicative methods used
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/08.jpeg)
Still,
the accuracy of planning ahead in longer horizons is restricted. The
incorporation of unpredictable parameters in the configuration through a
projection of the possible setting of the network in the future may
lead to unsafe results.
Inventory management/capacity planning/lot sizing
Inventories
are used by most companies as a buffer between supply chain stages to
handle uncertainty and volatile demand. Prior to the 1990s, where the
main supply chain phases, namely procurement, production, and
distribution, were regarded in isolation, companies maintained buffers
of large inventories due to the lack of regulatory mechanisms and
feedback. The basis for manufacturing and inventory planning was
relatively safe forecasts. However, in the era of customisation the
basis is actual orders and the pursuit is minimisation of inventories.
These requirements constitute inventory management and capacity planning
functions very important for a profitable MC implementation.
In
complex distributed systems such as modern manufacturing companies with a
global presence, the question of optimal dimensioning and positioning
of inventory emerges as a challenging research question. Various
strategies for inventory planning have been reported based on how the
underlying demand and return processes are modelled over time, thus
making a distinction between constant, continuous time-varying, and
discrete time-varying demand and return models. Integrated capacity
planning methods encompassing stochastic dynamic optimisation models
over volatile planning horizons exhibit high performance in the context
of MC and personalisation. The DEWIP (decentralised WIP) control
mechanism, focusing on establishing control loops
between work centres for adjusting the WIP levels dynamically. Its
performance was assessed against other well-accepted systems such as
LOOR, Conwip, and Polca. Methods used for solving the capacitated lot
sizing problem are indicatively shown in Fig. 9.
Fig. 9 Methods (indicative) used for solving the capacitated lot sizing problem
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/09.jpeg)
In
particular, in just-in-time (JIT) environments, MC impacts the amount
of inventory that needs to be carried by firms that supply many part
variants to a JIT assembly line. In addition, the supply of parts is
performed either on constant order cycles or more commonly under
non-constant cycles. The goal chasing heuristic, pioneered within
the Toyota production system, seeks to minimise the variance between the
actual number of units of a part required by the assembly line and the
average demand rate on a product-unit-by-product-unit basis, while
applying penalties for observed shortages or overages. Of course,
information sharing and partner coordination systems are a prerequisite
for JIT procurements. For instance, DELL, which achieved a highly
coordinated supply chain to respond to MC, communicated its inventory
levels and replenishment needs on an hourly basis with its key suppliers
and required from the latter to locate their facilities within a 15-min
distance from DELL facilities. Another consideration during
inventory management is the type of postponement applied in a company.
Studies have shown that postponement structures allow firms to meet the
increased customisation demands with lower inventory levels in the case
of time postponement (make-to-order), or with shorter lead times in the
case of form postponement. Also, an assemble-to-order process, a
variation of form postponement, does not hold inventory of the finished
product, while in form postponement, finished goods inventory for each
distinct product at the product's respective point of customisation is
kept. An indicative example is given in the case of Hewlett
Packard, where using form postponement, the company achieved the
postponement of the final assembly of their DeskJet printers to their
local distribution centres.
Logistics management
Logistics can play a crucial role in optimising the position of the customer order decoupling point and balance between demand satisfaction flexibility and productivity. In a customer-centric environment, the supply chain logistics must be organised and operated in a responsive and at the same time cost-effective manner. Customisation of the bundle of product/services is often pushed downstream the supply chain logistics, and postponement strategies are utilised as an enabler for customisation. Maintaining the product in a neutral and non-committed form for as long as possible, however, implicates the logistics process. Traditional logistics management systems and strategies need to be revisited in the context of customisation, since distribution activities play a key role in achieving high product variety, while remaining competitive. Most OEMs form strategic alliances with third-party logistic (TPLs) companies. The introduction of TPLs in the supply chain serves two purposes. First, it acts as a means of reducing the complexity of management for an OEM through shifting the responsibilities of transportation, and in many times customisation, to the TPLs. Second, it extends the customisation capabilities as TPLs can actively implement postponement strategies. Postponement strategies with logistics as an enabler are located at the bottom of Fig. 10 and can serve all types of customisation, from plain shipment to order up to extremes of engineer-to-order or personalisation.
Fig. 10 Postponement strategies for different supply chain structures and logistics
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/10.jpeg)
Moreover,
the management of logistics is a process inherently based on
communication and collaboration. Developments of either
function-specific or all-in-one ICT solutions targeted on logistics. Tools for warehouse and transportation management,
ERP, supply chain management (SCM), and information sharing are reported
under the umbrella of e-logistics. The concept of virtual logistics is
also proposed for separating the physical and digital aspects of
logistics operations, having Internet as an enabling means to
handle ownership and control of resources.
Supply chain control
The
information transferred from one supply chain tier to the next in the
form of orders is often distorted, a phenomenon known as the bullwhip
effect. In particular, when customer demand is volatile such as the case
is in MP, the bullwhip effect misguides upstream members of the supply
chain in their inventory and production decisions. Nevertheless,
the performance of the supply chain is highly sensitive to the control
laws used for its operation. The application of the wrong control policy
may have as a result the amplification of variance instead on its
minimisation. Dynamic modelling approaches have been proposed to manage
supply chains, accounting for the flow of information and material, to
capture the system dynamics. Multi-agent approaches for modelling
supply chain dynamics. Software components known as
agents represent supply chain entities (supplier, dealers, etc.), their
constituent control elements (e.g. inventory policy), and their
interaction protocols (e.g. message types). The agent framework utilises
a library of supply chain modelling components that have derived after
analysis of several diversified supply chains. For instance, a novel
oscillator analogy in presented for modelling the manufacturing
systems dynamics. The proposed analogy considers a single degree of
freedom mass vibrator and a production system, where the oscillation
model has as input forces, while the manufacturing system has demand as
excitation. The purpose is to use this simple oscillator analogy to
predict demand fluctuations and take actions towards alignment.
Another
necessity in supply chain control is the traceability of goods.
Traceability methods, essential for perishable products and high-value
shipments, exploit the radio frequency identification (RFID) technology
during the last years. A traceability system that traces lots
and activities is proposed by Bechini et al. The study examines
the problem from a communication perspective, stressing the need to use
neutral file formats and protocols such as XML (extended markup
language) and SOAP (simple object access protocol) in such applications.
The emerging technology of IoT can provide ubiquitous traceability
solutions. Combining data collection methods based on wireless sensor
network (WSN) with the IoT principles, the method can
support the traceability of goods in the food industry. In a similar
concept, the role of an IoT infrastructure for order fulfilment in a
collaborative warehousing environment. The IoT
infrastructure is based on RFID, ambient intelligence, and multi-agent
system, and it integrates a bottom-up approach with decision support
mechanisms such as self-organisation and negotiation protocols between
agents based on a cooperation concept.
Supply chains formed for
servicing customisation are more complex as structures and less
predictable in their dynamic behaviour than stable traditional supply
chains. Recent complexity studies deal with the emerging aspects of
increasing complexity of manufacturing activities and the dynamic nature
of supply chains. The importance of managing the complexity in
supply chains is evident, as recent studies depict that lower
manufacturing network complexity is associated with reduced costs and
overall network performance. A complete and comprehensive
review of complexity in engineering design and manufacturing.
Simulation and ICT support systems for manufacturing networks life cycle
Robust
and flexible ICT mechanisms are rendered necessary for improving
performance in each of the previous life cycle aspects of supply chains
and for bridging inter- and intra-enterprise collaboration environments.
Digital enterprise technologies in general represent an established,
new synthesis of technologies and systems for product and process
development and life cycle management on a global basis that brings
many benefits to companies. For instance, the benefits offered by the
adoption of virtual engineering through the life cycle of production are
shown in Fig. 11. To manage the huge portfolio of products and
variety, as well as tracking the expanding customer base, ERP and CRM
suites are necessary tools. Additionally, cloud technology is already
revolutionising core manufacturing aspects and provides ample benefits
for supply chain and manufacturing network life cycle. Cloud technology
and the IoT are major ICT trends that will reshape the way enterprises
function in the years to come.
Fig. 11 Increased efficiency through virtual engineering approaches
![](https://learn.saylor.org/pluginfile.php/5619134/mod_book/chapter/50005/11.jpeg)
Simulation for manufacturing network design
Literature
on ICT-based systems for improving manufacturing networks is abundant
and highlights the need for increased penetration of ICT systems in
design, planning, and operation phases. A simulation-based method to
model and optimise supply chain operations by taking into consideration
their end-of-life operations is used to evaluate the capability of OEMs
to achieve quantitative performance targets defined by environmental
impacts and life cycle costs. A discrete event simulation model of
a capacitated supply chain is developed and a procedure to dynamically
adjust the replenishment parameters based on re-optimisation during
different parts of the seasonal demand cycle is explained. A model
is implemented in the form of Internet-enabled software framework,
offering a set of characteristics, including virtual organisation,
scheduling, and monitoring, in order to support cooperation and flexible
planning and monitoring across extended manufacturing enterprise.
Furthermore, the evaluation of the performance of automotive
manufacturing networks under highly diversified product demand is
succeeded through discrete event simulation models with the use
of multiple conflicting user-defined criteria such as lead time, final
product cost, flexibility, annual production volume, and environmental
impact due to product transportation. Finally, the application of the
mesoscopic simulation approach to a real-world supply chain example is
illustrated utilising the MesoSim simulation software.
Existing
simulation-based approaches do not tackle the numerous issues of
manufacturing network design in a holistic integrated manner. The
results of individual modules used for tackling network design
sub-problems often contradict each other because they refer to not
directly related manufacturing information and context (e.g. long-term
strategic scheduling vs. short-term operational scheduling), while
harmonising the context among these modules is challenging. This
shortcoming hinders the applicability of tools to real manufacturing
systems as it reduces the trustworthiness of results to the eyes of the
planner among other reasons.
Enterprise resource planning
An
ERP system is a suite of integrated software applications used to manage
transactions through company-wide business processes, by using a common
database, standard procedures, and data sharing between and within
functional areas. Such ICT systems entail major investments and
involve extensive efforts and organisational changes in companies that
decide to employ them. ERP systems are becoming more and more prevalent
throughout the international business world. Nowadays, in most
production distribution companies, ERP systems are used to support
production and distribution activities and they are designed to
integrate and partially automate financial, resource management,
commercial, after-sale, manufacturing, and other business functions into
one system around a database.
A trend, especially in the
mid-market, is to provide specific ERP modules as services. Such need
generates the challenge for ERP system providers to offer mobile-capable
ERP solutions. Another issue is the reporting and data analysis, which
grows with the information needs of users. Research in big data
analytics and business intelligence (BI) should become more tightly
integrated with research and applications of ERP.
Customer relationship management
In
Internet-based retailing, which is the preferred business model
followed in MC, customer information management is a necessity. In
particular, exploiting consumer data, such as purchase history,
purchasing habits, and regional purchasing patterns, are the cornerstone
of success for any company active in MC. In business-to-business and
business-to-customer, CRM suites are thus indispensable. According to
Strauss and Frost, CRM involves, as a first step, research to gain
insight so as to identify potential and current customers. In a second
step, customer information is used to differentiate the customer base
according to specific criteria. Finally, the third step involves
customised offerings for those customers that are identified as
"superior" from the previous phase, enabling thus, the targeted offering
of customised products. During the first step of identification of
customers, market research and consumer behaviour models are used. In a
second phase, for establishing differentiation techniques, data mining
and KPIs assessment are used. Finally, for fine-tuning customisation
options, information such as price, variants, promotions, and regions
are examined.
As Internet becomes ubiquitous in business,
CRM has been acknowledged as an enabler for better customisation since
it offers management of the new market model less disruptively.
Internet-enabled CRM tools also bring the customer closer to the
enterprise and allow highly responsive customer-centred systems without
significant increase in costs. e-CRM implementations have been
assessed in the study. Noticeably, most major CRM suite vendors
have started providing cloud-based services, a business model that suits
SMEs that cannot afford huge ICT investments. Based on the balanced
scorecard method, the study assessed e-CRM performance using 42
criteria in a number of companies. The results show that a successful
CRM implementation is associated with tangible outcomes, such as
improvements in financial indicators, customer value, brand image, and
innovation. Finally, the latest generation of CRM tools, referred to as
social CRM, exploit social networking technology to harness information
about customer insights and engagement.
Cloud computing and manufacturing
A
comprehensive definition of cloud computing is provided by the National
Institute of Standards and Technology: "a model for enabling
ubiquitous, convenient, on-demand network access to a shared pool of
configurable computing resources (e.g. networks, servers, storage,
applications, and services) that can be rapidly provisioned and released
with minimal management effort or service provider interaction".
Several applications have been reported in recent years where a cloud
infrastructure is used to host and expose services related to
manufacturing, such as: machine availability monitoring,
collaborative and adaptive process planning, online tool-path
programming based on real-time machine monitoring, manufacturing
collaboration and data integration based on the STEP standard, and
collaborative design.
The benefits of cloud for improving
manufacturing network performance are numerous (Table 1). Cloud can
offer increased mobility and ubiquitous information to an enterprise
since the solutions it offers are independent of device and location.
Moreover, computational resources are virtualised, scalable, and
available at the time of demand. Therefore, the intensive costs for
deploying high-performance computing resources are avoided. In addition
to that, purchasing the application using the model software as a
service is advantageous for SMEs who cannot afford the huge investments
that commercial software suites entail. However, there are some
considerations also (Table 1). A main challenge for the adoption of
cloud in manufacturing is the lack of awareness on security issues. This
major issue can be addressed using security concepts and inherently
safe architectures, such as privately deployed clouds. The security
concept must include availability of ICT systems, network security,
software application security, data security, and finally operational
security. Considerable funding is spent by the global security software
market, in order to alleviate security issues. Recent reports show that
the expenditure on cloud security is expected to rise 13-fold by 2018. Moreover, there is the possibility of backlash from
entrenched ideas, manufacturing processes and models caused by the
hesitation for the adoption of innovative technology. Finally, the lack
of standardisation and regulation around cloud hinders its acceptance by
the industry.
Table 1 Benefits and drawbacks of cloud technology for manufacturing
Benefits | Drawbacks |
---|---|
Increased mobility that allows decentralised and distributed SCM | Lack of standardisation and protocols create hesitation in adoption of Cloud solutions |
Ubiquitous access to information context empowering decision-making | Security and lack of awareness on security issues, especially in SMEs, that are part of supply chains/clusters |
Device and location independent offering context-sensitive visualisation of crucial data relevant to the mfg. network | Privacy issues generate legal concerns, identity management, access control, and regulatory compliance |
Hidden complexity permits the diffusion of ICT solutions even to traditional, averted by disruptive solutions, sectors | Dependence on the cloud provider (provider stops providing services, absence of contracts/regulation) |
Virtualised and scalable on-demand computational resources (problems of varied computational complexity) | Loss of control over data (assuring smaller companies that their data are not visible by anyone in the supply chain, but the owner is challenging) |
Low cost for SMEs that cannot afford huge ICT investments and lack the know-how to maintain them |