This is the second in a series addressing the principles of achieving product diversity with scale. With proper management and alignment of processes throughout the value chain, it is possible for manufacturers to meet the diversity of requirements and the requirements of diversity, but first, challenges must be addressed.
In this post, we’ll focus specifically on how manufacturing and IT can be impacted by product diversity.
Manufacturing Challenges. The manufacturing department can find product diversity a plague to their organizational structure. A production team may have to assemble new products or configurations on a daily basis and this puts major pressure on manufacturing planning which leads to difficulties in:
- Effective organization
- Balancing product lines
- Ensuring cost efficiencies
- Handling short order fulfillment
To combat these challenges companies are known to keep large and costly inventories. Alternatively, they resort to ad hoc solutions where management becomes a nightmare, the risk of error increases, and inevitably quality is compromised.
In 2010, Toyota was forced to recall millions of cars due to quality problems. In the interview Under the Hood of Toyota’s Recall: ‘A Tremendous Expansion of Complexity’, automotive product development expert Takahiro Fujimoto attributed the crisis to “a tremendous expansion of complexity“ caused by “the number of models sold in the global market, and the growing complexity of each individual vehicle due to social pressure and market demand”.
Toyota is not alone with these problems; hundreds of companies throughout the globe suffer recalls; in fact thousands of products are recalled each year because of quality issues. Choking hazards from toy parts, faulty tubes on breathing devices or acceleration problems on cars – these problems do not normally occur because companies produce bad quality products in general but because part of their review, check or control process has gone askew.
Companies can only reduce product risk by understanding where things go wrong, they need to understand the challenges and find ways to combat them.
IT Challenges. Many IT systems reach their limits when challenged with managing product diversity. As a result, companies resort to inefficient methods of management:
- Informal solutions
- ERP solutions
These options don’t offer enough complexity to manage the critical iterative necessary for a product platform. As a result they reach their limit of suitability very quickly.
Companies experiencing poorly managed product diversity may encounter one or more of the following:
- Limited flexibility because of difficulties standardizing production and assembly equipment
- Quality issues in the final product and expensive rework because of manufacturing errors
- Production line waste and resulting costs explosion
- High warranty costs leading to a greater burden on field service teams
- Failure to meet regional or environmental directives can result in lost sales and costly product recalls
And this ultimately leads to:
- Diminishing margins and reduced profitability
- Impaired innovation
- Damaged brand reputation
The more versions of the product you produce, the more places you sell and service your product, greater the magnitude of these challenges.
What is your organization doing to combat product diversity challenges?