Mass Customization Strategy in Global Supply

Master of International Business goerning body 12 fortune Customization International Supply Chain perplexity Yuliya Samokhina, Olga Baranova, Yuliya Pronkina, black lovage Manzhosov Content The sanctioned opinions of potentiometer customization. Principles and goals. (by Yulia Samokhina) Introduction3 kitty Customization main descriptions3 Evolution of passel customization 4 Mass customization strategies advantages and disadvantages.. 4 Mass customization as a a tho6 Conclusion8 Postpvirtuo nighnt strategies (by Olga Baranova) What is clench? Postponement typology establish on protect strand activity9 Benefits of use grip schema13 Critical success factors and i moot potbellydidate for deferment outline14 standard arche images (by Yulia Pronkina) Definition of modules in the framework of spheric bring out grasp caution15 Types of quantityity18 Benefits and drawbacks of standardity. Requirements for implication of the spirit modularity19 standardizatio n in self-propelled indus paw over (Volkswagens modular system) 21 Shargond curriculum strategies (by Alexander Manzhosov) Introduction23 Platform imagination 24 The reasons of work throughing curriculums25Advantages and disadvantages of implementing sh atomic number 18d program strategies26 Sh bed political program strategies 28 Volkswagen Group. MQB dodging 29 Conclusion29 References The basic impressions of smokestack customization. Principles and goals. By Yuliya Samokhina Introduction Today, people assimilate love in the knowledge domain with exposeing technologies, where e realone necessitates to be distinguished. Companies compete with bleak(prenominal) exchange subject firms, beca egest they want to attract nodes as much as accomplishable. Mass customization burn gondola carry out satisfy nodes entreat to help them obtain outputs with take aimment characteristics.Previously, string reactor occupation systems enormous dealt be sufficient for manufacturer and consumers. nonetheless, cosmic string reactor customization obstinate this problem to create comfortable conditions for altogether told to provide person merchandise. For sample, straight off retailers dont want to suffer much collections per season, exactly they want to possess much than styles at heart the season. Companies defecate late lines of clothes to their shops ein truth four to six weeks. H&M and Zara mod agete addd toil to utilise electronic information processing system use science. Zara uses data from its 426 stores to spot new trends, and offers 10,000 new yieldions a year.TopShop sells as m whatsoever as 30 pairs of knickers a minute, 6,000 pairs of jeans a day and 35,000 pairs of shoes every week. Why it occurs? The root is very simple go forth stove in messiness customization line of business amaze has to be waxy and responsive to consumer suck. Main issues will be cogitateed in the establish d let the s tairs. Mass Customization main definitions Usually, luck customization requires very advanced and pliant network, because the original pattern of loudness customization is adapting one-to-one. Now, everyone brook make increases by themselves.Here, I want to give more(prenominal) successful definitions of Mass Customization Mass customization is non a pure hardly a hybrid manufacturing concept, which joins the efficiency of trading operations and divers(prenominal)iation by providing passing c be for added outputs. Mass customization refers to a client co- propose butt on of harvests and answers, which meet the needs of each somebodyistic client with respectfulness to certain ingathering features. All operations ar coifed wi prune a fixed solution space, characterized by stable but tranquillise flexible and responsive military operationes. As a expiration, the make ups associated with customization al number 1 for a rice take that does non imply a switch in an swiftness grocery store segment. (Piller 2005c, p. 315 emphasis in original). Thus, now each vendee merchantman acquire any respectables, but the price for it will be senior high schooler. Comm besides, it isnt problem, because each person wants to be allocated from crowd. For instance, if two girls come in school-leaving party in one dress, it will be catastrophe for them. Fortunately, our multiplication has got a lot of articles with topic spate customization, and indeed we can consider toilet customization from several(predicate) foreshortenings. Evolution of mass customizationFirst, I think it is inevitable to briefly describe the ontogeny of mass fruit to mass customization. Mass customization has been one of the causes of the economic growth in the 21st century. Bedepression, you can play figure, which shows evolution of mass customization Fig 1 Evolution of mass customization1 The archetypal sentence our civilization has instancefuld with mass custom ization in pre-industrialization era. In anguish of this fact, today we as headspring need started to break in it. Of course, these beats atomic number 18 very different, because today people use modern technologies.Between these periods we can observe mass outturn, which come in vogue with fundamental benefit of economy of de exceed and it was peak in mid century. For exercise, it was time of Soviet Union, and then companies produced a lot of sympathetic clothes, shoes and etc. In late twentieth century, mass customization was back. Manufacturers offer different variation of wares and customization is practical. Methods of application will consider in the next section. Mass customization strategies advantages and disadvantages It is very nearly-valuable to understand how the mass customization works in coiffure.Generally, scientists mark out four strategies transp bent, cosmetic, adaptive and collaborative. A few words about each system * Cosmetic dodge compani es produce a standard return but present it other than to different clients. Thereby customers satisfied with the convergence, and if they want, they can change packaging, for instance, the color, accessories, and other customer personalities. * Transp atomic number 18nt dodging this strategy is use by companies, which have peculiarly issueledge of desires and preferences of customers. For transp bent strategy is positive E-business.For example, service in website can analyses leveragings, then it can recommend something base on previous purchases. * adaptational strategy producers try to modify standard product for the needs of customers. Thus, companies try to plan and represent of almost all affirmable combinations of product modules, desire Microsoft. Then somebody corrupt softw be, he/she can add requirement functions. * Collaborative strategy in this case companies dont know what customers eventually want. Companies have to understand needs of customers and help t o determine with prerequisite product, as in prove to create its.It is very ofttimes, then strategy depends on patience in that location connection worked. For example, companies which produce food and beverages use cosmetic and transparent strategies. In my opinion, manufacturers have to estimate their possibilities if they want have major powery profit. Why are companies interested in mass customization? The answer to this misgiving is presented in the benefits of the above strategies * Maximized commercialise persona by maximise customers satisfaction and number of customers. * Cut cost of archive and material neutralise performance has to work as a just in time.Companies should evacuate deep inventories of undefiled goods. * Increase cash f diminished turn down inventories, prepayment (thus lower receivables) increase cash flow. * Shorten time of responsiveness (accumulative time from receiving orders to delivering) design bodily structure and flexible manufa cturing in mass customization allows the friendship to adapt to different implys rapidly. * Ability to turn in a full line of products or service with lower be the purpose of mass customization is to tick products to particular shoots, resulting in broader product lines of the come with and a much lower find of dis utilise inventory.It is obvious, that companies cant have only positive sides. It is important to understand, which problems whitethorn arise 1. In mass customization cost are usually greater than in mass output. In some cases the product whitethorn not be different from standard product, but the price will be higher. Buyers will be unhappy, thus mass customization is in in force(p). 2. Increasing of training in the action of item-by-item goods could twist to cost. In this case the prob might of production of defective goods rises. 3. Requirements for employees should be higher. Educated employees have to offer the optimal interpretation responding to the u stomers needs, otherwise, follow can lose the loyalty of customers. 4. The production process can have difficulties with flexibility. Mass customization as a process I think that it is very important to know how the customization process can be divided into many sub-processes including the main stages of the measure range of mountains. Moreover, it can help us to understand mass customization in details. First, I want to enumerate all sub-processes and explain at greater length. * The training sub-process * The interaction sub-process * The buying sub-process * The production sub-process * The logisticals sub-process The information sub-process. 1. The development sub-process. The product everlastingly should develop, if company wants that the mass customization will be successful. Requirements of buyers will be satisfied and cost of production will be deoxidized. The modularity is quite frameive decision as it allows achieving the economy of eggshell and economy of scope. On the other hand, the modularity can be simple for fictive by competitors and development is more expensive. Other strategy, such(prenominal) as a commonality and course of study strategies help to work to the companies to increase reusability in mass customization.Thus, product development in the mass customization is carried out through origination engineers. Very high effect is reached, when the client participates in development of products himself. Companies should use customers innovative abilities. 2. The interaction sub-process. This process is also elicitation process. Thus, customer has to beget the product that exactly fulfills his requirements. Company has to understand that everyone wants. Usually, to identify four types of elicitation process identification (e. g. name and address), customers selections from menus of alternatives, physical measurements and reactions to prototypes.Usually, customers buy products in the earnings (in different Internet-shops) or go to the retail center and also buy necessary thing. Today, it is very quickly and well to use Internet. For example, Adidas offers to buy sneakers in their web-site, in that respect everyone can create own style. The interaction process is associated with electronic features. some other important thing that in mass customization consumers are actively involved in production process. It is normal then customers are a lot called coproducers or prosumers. 3. The acquire sub-process. Suppliers in mass customization are the very important part in reducing costs.Companies with good suppliers have got really warlike advantage. It is fact that the bring home the baconment of high profits lies in an effective and efficient helping and material buy. Outsourcing strategies have been formed collect to the modular computer architectures. The modular sourcing applies to reduce difficulty in purchasing process. In this case, companies have to faith each other and closely cooperate, i f they want to achieve incredible results. 4. The production sub-process. Companies should counselling on the economic order measure (EOQ). Thus, the processes of production in mass customization should be minimized.The optimization of the production is the main task in the process. If a company wants to meet all the needs of customers, the production essential be flexible. Companies need to understand then they want to make individual product, I mean, at what stage. Producers have got two important come upon name slow up product specialization and deferral. They are two related concepts, whereby the path placing the decoupling point at later on stages in the production processes. Another one describes that some production activities are not initiated until customer order arrives. 5.The logistics sub-process. This process includes work with clients and suppliers, plus accompanying. Usually, it call terms upstream and downriver. Upstream logistic is conveyancing, warehousi ng of materials and components for production and consolidation. The downstream logistics is the packaging and shipment of end products to customers. Unfortunately, these types of logistics verbalism serious problems in mass customization, because costs of individualization increase. The all logistic has very heavy costs. Companies spend a lot of money for transportation and warehousing equipment.It is a reason why these companies use outsourcing. Mass customization doesnt have inventories of end product. The companies try to work individually with each person. zilch wants to resemble another. 6. Information sub-process. This process cooperates with all processes described above. The purpose of the information sub-process is the providing of information stream. The effective information system should capture pursuance stages customers needs, develop a list of product requirements, determine manufacturing limitedations with respect to routing, material processing, convocation an d etc.Radio Frequency Identification can help to make identification. In appall of the fact that modern technologies are very useful, it remains very expensive. Another useful method for the coordination in mass customization is Vendor Managed Inventory (VMI). any(prenominal) supplier has got timely information about stock directs of modules and components. In addition, the integrating of ERP (Enterprise Resource Planning) helps to improve the agility and adaptability to unforeseen events. The mass customization will make profit if the software is constantly developed and updated.Finally, companies should work with a large number of data very accurately. I try to consider mass customization not only as one whole process, but discern sub-processes. It helps to understand the nature of mass customization. notwithstanding, I should mention interrelated strategies such as clench and modularization, because usually these strategies allow the companies to work successfully. In my essay I will give short concepts of strategy as below in this work other students will describe them in details. Modularization is necessary for the success of mass customization where set-up costs are critical.Also, modularization allows making rapid convention and costing efficiency. Modularization usually uses in this field such as computer science, construction, pattern engineering and production. The main idea in modularization is the breaking down of the product into convertible components or group of components, which is called modules. The second strategy is keep Postponement convey delaying activities in the supplement chain until customer orders are received with the intention of customizing products, as op constitute to performing those activities in expectation of future orders. These strategies are quite often used.Every year, the mass customization will be more popular in the companies. Conclusion of this part In this essay, I consider the most important aspe cts of mass customization. First, it was given the basic concepts of mass customization. I time-tested to examine the most important definitions and to explain the heart of mass customization. After that, I described a little write up from mass production to mass customization. History has shown that the mass customization has already been use to date. Now companies are using modern engineering, so the result of with-it mass customization is different.Companies produce products more quickly than ever sooner. Information technology is used in all stages of production, which helps companies to satisfy consumer preferences. Also, I examined mass customization not only as a single process, but also to soften the process in move, included development, interaction, purchasing, production, logistic and information sub-processes. Each sub-process has to be adjusted in order to avoid stagnation in the production and filing warehouses. In the essay, I also mentioned the main advantages and frequently used strategies.The company chooses the strategy which it thinks it is the most appropriate strategy. Usually, the strategy depends on the industry in which the company operates. In my opinion, the mass customization is ontogeny and is very useful for manufacturers and consumers. First, customers are satisfied with goods with necessary characteristics. Second, company in the event of mass customization has lower costs comparingd to if it was made for each customer a altogether unique product. Finally, I want to emphasize that the mass customization has both advantages and disadvantages. The company has to make a choice itself.Postponement strategies By Olga Baranova What is clutches? Effective management of a put out chain includes thinking creatively about how to meld and perform logistics and manufacturing activities. Postponement strategy offer opport building blockies to achieve manner of speaking of products in a timely and cost-effective manner by rearran ging the conventional production and logistics structures, which are often designed and managed autonomously. Thus, grip, also known as delayed differentiation, is a publish chain strategy that delays product differentiation at a point closer to the customer.This involves designing and develop standard or generic configurable products that can be customized quickly and inexpensively once literal consumer make is known. Postponement also entails the implementation of specific inventory strategies to position inventory farther away from the customer turn fulfilling service take aim objectives and reducing inventory costs and minimizing risk, strategies for holding the secure inventory, at the right place, in the right form. By pushing the point of product differentiation closer to the customer, cargo hold can improve customer service levels, reduce inventory costs, and increase top-line revenue.The postponement strategy is based on the next(a) two basic principles of take betokening 1. Theaccuracy of the betdemand decreases with an increase in the time horizon. The farther the time window for which the demand is being forecasted, the more inaccurate it will be. The figure graphically represents this effect as a funnel as time extends farther into the future, the forecast error grows, showing that the forecast demand will have big and larger variations as time periods progress into the future. 2.Demand projections for a product group are generally more accurate than projections for individual products. It is much easier to forecast the total demand for LCD TVs than it is for an individual TV of a specific brand, model, screen size, resolution, and color contrast ratio. Postponement typology based on assess chain activity It is based on the review of 15 studies set back 1 was developed to summarize the terminologies used to define different postponement types. These define postponement on the ass of activities or place to differentiate betwixt different postponement types.The check marks in await of every analyze indicate the postponement terminology used for that study. The following section (table 1) summarizes these terminologies under product development, purchasing, manufacturing and logistics postponement. Table 1 Summary of postponement terminologies based on the review of studies Product Development Postponement dodge Product development postponement is considered extreme form of customization with all activities including product design taking place after the placement of an order.Moreover in this case, the customers are also involved during the design stage. Product development postponement strategy is preferred in passing volatile environments, involving high levels of hesitancy in terms of consumer demands, technological developments and government regulations. 2 For instance Toyota deals with the high levels of uncertainty by letting their suppliers come up with novel ideas and designs without limiting t hem with unmitigated specification constraints. The suppliers have total independence to explore different areas within a broad range of design specs.During that time, people at Toyota comprehend gathering commercialise data on consumer demands and technological trends, till some convergence is achieved. 3 Purchasing Postponement Strategy In the case of purchasing postponement strategy, the purchasing of raw materials is postponed until the information on downstream demand comes available. Purchasing postponement strategy is preferred when the demand is highly uncertain, raw material has high obsolescence cost and is of high value in terms of total product cost or ties up gigantic amount of working capital.Purchasing postponement would work when the market belong time is greater than the manufacturers production lead time plus the suppliers lead time. 3 However, if the market lead time constraints the manufacturer from applying purchasing postponement, it can be adopted select ively for a range of products. This would be possible if the company is able to differentiate between base demand and tide demand. For base demand it can proceed with forecasted demand and purchase raw material or even proceed with production in case of foresightfuler production lead times. However for surge emand, the company can wait till demand pattern becomes available and then it can proceed to place orders. In order to manage supplies for the surge demand, the manufacturers can have separate design of cater chain to deal with the surge demand, since under most scenarios regular production lead time for the surge demand would be greater than the market lead time. This design would be based on travel rapidly and agility with focus on fulfilling orders quickly rather than focusing lower cost by picture up fast production lines and purchasing raw materials from a different set of suppliers.However this would be feasible when the increase in cost overdue to fast paced product ion would be less than the gains accrued by adopting purchasing postponement strategy. This fact is highlighted by the postponement strategy adopted by Benetton, an apparel manufacturer, which separates between base demand and unpredictable demand. For the base demand, Benetton subcontracts to low cost sources, which have higher lead times, dapple for the unpredictable part, they employ their own flexible facilities which have higher operating costs.However for purchasing postponement to work, it is imperative to have high level of quislingism between the manufacturers and the suppliers. Suppliers are infallible to respond to the downstream demand in minimum possible time so that the manufacturers can deliver within the market lead times, while resorting to purchasing postponement. In recent times e- market places have sprung up, enabling the manufacturers to get linked with the suppliers without any geographical constraints3. This increases the options of the manufacturers to r espond to actual demand.However, having suppliers or their stock centers in close proximity to the manufacturers would support purchasing postponement strategy. Moreover this type of impulse buying contradicts the cash advance of developing long-term relationships with the suppliers and could also jeopardize the relationships with the existing suppliers. From a cater chain perspective, purchasing postponement involves shifting the ownership of the goods to the most suitable location. However in case of an imbalanced power structure, a manufacturer might force its suppliers to hold finished goods inventories in order to reduce its own risk and uncertainty cost.In this situation the suppliers are left with speculating the downstream demand, often resulting in the overall inventory buildup or Bullwhip effect in the supply chain, which reduces the efficiency of the entire chain. 3 Manufacturing Postponement Strategy Manufacturing postponement is based on holding products at plan le vel later to be customized as per demand pattern. This is based on the principle that it is easier to forecast demand pattern at component level as canvassd to finished product stage3.It involves delaying manufacturing activities and holding inventory in neutral form till the demand pattern becomes visible. Thus this strategy works where there are multiple product derivatives, which could be due to different cultural, technological or market related issues. High product variation makes it difficult to forecast and hold inventory at finished stage. Manufacturing postponement allows companies to operate without holding finished goods inventory while maintaining bulk of their inventories at pre-customized form.The inventory at this level has lower risk attached to it because their raw state permits them for wide example variations. 4 For example, fashion apparel retail business is marked by high product obsolescence costs. This is because of the fact that product are planned long bef ore the actual demand information becomes visible. Zara on the other hand has been able to capture market trends by reducing the time required to introduce new products. Among other steps, Zara uses manufacturing postponement to reduce its lead times.Zara concentrates its prognostication efforts on the kind 14and amount of fabric it buys. Zara gains more speed and flexibility by purchasing more than 50% of its fabric un-dyed later to be used for several(a) products and lines ( computer programme based). It reduces the cost as well as the chances of forecast errors. In un-dyed form it is easier to convert fabric to other uses, while it gives Zara the flexibility to adapt to colors close to the selling season based on the immediate market needs. 5 Assembly postponement StrategyThe computer industry selling customizable product peculiarly through the internet practice assembly postponement strategy. The customers select from different options such as color, reposition specs, proce ssors, and the companies such as Dell, HP and Compaq assemble the required models from components received from the authoritative Equipment Manufacturers (OEMs). HP postpones the nett assembling step to the last stage at the topical anaesthetic distribution centers and once demand becomes visible, final manufacturing/assembly activities such as power supply, packaging and labeling are carried out.Labeling postponement Strategy Labeling postponement is adopted when the products are marketed under different brand names or are distributed to different markets. For example at times the same OEMs are used by different brands for their products and the OEMs mark the products with labels after receiving respective orders. as well as certain apparel distribution companies keep products 16unmarked and upon pass of orders from miscellaneous institutions print their logos before dispatching the orders. encase postponement StrategyPackaging postponement strategy is adopted when the prod ucts are marketed in different bundles or parcel of land sizes. 6 The final packaging is delayed till orders are confirmed. Packaging activities are generally performed in the downstream locations such as centralized distribution centers. Logistics postponement Strategy Logistics postponement involves a delay in the final movement of the goods. Instead of placing the goods at the final point in the supply chain, they are kept at a central location, with the acquire of following the demand pattern for the final shipments. This helps to reduce the inventories in the supply chain 17 while at the same time improves customer responsiveness. 3 Maintaining inventories at final locations would increase the inventory costs while at the same time would result in stock outs at some locations and excess stock at other locations. Logistics postponement often involves the repositioning of the final manufacturing activities downstream closer to the end user. This helps particularly where topic al anaesthetic variations in terms of consumer preferences exist, which could be cave in, catered to by carrying out the final customization at the local distributer level.Logistics postponement suits those products, which have higher inventory cost and lower transportation costs. Logistics postponement in most of the cases requires a sudden and more responsive transportation system and can result in higher transportation costs. Benefits of using postponement strategy Successful postponement implementations improve customer satisfaction while minimizing inventory costs. By improve their ability to respond to changes in demand from local and global markets, companies are better able to compete on time while remain cost rivalrous. Improvement in client Satisfaction change magnitude ability to offer a wider range of customized goods * Reduced lead time for orders decrement in Inventory Cost * Inventory costs shift upstream to less expensive generic products, which also reduces i nventory obsolescence costs * Enables better planning and allocation of resources by reducing the forecasting horizon * Reduces inventory costs by as much as 30% to 40% in successful implementations Improvement in Order Fill range * Since finished products are manufactured from generic components, companies are better able to deliver finished goods on time as a result of postponement.Bottom-Line Benefits * Overall, postponements special benefits are to reduce the effects of market uncertainty and to meet customer needs, while effectively managing supply chain costs. In many cases, lower overall supply chain costs were achieved by respondents. Critical success factors and ideal candidate for postponement strategy The primevals to a successful postponement strategy are to produce standardized products and to incorporate customization at the most advantageous point in the supply chain.Proceeding from the aforesaid it is possible to allocate the following factors * Organizational buy -in and support is the primary critical success factor * Implementation of appropriate inventory deployment strategy * A postponement strategy is destined for failure without consistent top-down support from design through implementation * Product design modularity and business process reengineering are critical to ensure smooth execution * collaborationism among all internal functions of the supply chain, as well as with suppliers and customers * straight-laced metrics and incentives are also importantResolving the competing interests within a companys supply chain is also essential. Without collaboration, including changes in the rewards and metrics structures of a supply chain, the changes associated with postponement often result in poor execution. In addition, out-of-door collaboration with suppliers and consumers is critical. If suppliers cannot respond to the changes as a result of postponement, and if product design is not tailored to customer requirements, postponement c an result in cost overruns and change magnitude lead times.The foundation of every successful postponement implementation is organizational buy-in. If management is not willing to take risks, implement operative changes, and monitor adjusted metrics, they will be less presumable to reap the benefits of postponement. While many industries and companies are prime for postponement, there are certain business conditions that position a company for a more successful postponement implementation. Prominent among these are companies that produce a substantial variety of products with short product life cycles and which have a supply chain able to support mass customization.Regardless of business conditions, effective postponement implementation still requires collaboration, organizational buy-in, concerted effort, and the right information technology backbone. Modular Concepts in the Framework of International Supply Chain Management By Yuliya Pronkina In recent years, the competitive dy namics in general and the demand for product customization in particular have increased considerably in virtually all industry sectors partly as a result of new low-budget competitors in the global markets and partly by increasing demand for technological performance.The ability to react quickly to unprovided for(predicate) market changes is one of the decisive reasons for the development of modular product architectures. If a company wants to remain competitive or expand its market share, it is posed to manage the compromise between such conflicting goals as * low costs * short lead times * high quality of product. Modular strategy is intended to resolve this conflict and be able to become a solution to growing complexity of customizable production. It closely links with modular political program systems.In fact, modularity enables manufacturer to combine advantages of mass production (high volume, large quantity production) and product variety (flexible and versatile manufacturi ng systems, product tailoring, etc. ) at lessen cost and increased economies of scale. All in all product development strategies such as modularity, product modular platform, etc are the key to achieving low cost customization The modular concept has played significant role in the development of mass customization. This article examines main aspects of modular concept in the framework of global supply chain management.Definition of modules in the framework of global supply chain management To understand what modular strategy represents we tried to give the definitions of modules and find its real position among other strategies of mass customization. match to the Oxford Dictionary, definition of modules in general is following Module is each of a set of standardized parts or independent units that can be used to construct a more complex structure, such as an item of furniture or a building. There are well-provided statements among authors of studies about general meaning of modul arity. accord to them we can conclude that modularity refers to an approach to elevate complex products and processes efficiently by decomposing complex tasks into smaller parts. It allows the tasks to be managed independently and yet work together as a whole without pliable performance. Thus we can consider modularity as the ability to configure product variants by mixing and matching components within similar product architecture to create variety of configuration without losing its functionality. Examples of modules would include many components in automobiles engines, transmissions, speech sound equipment, tire/wheel options, etc.In electronics, modules would include processor boards, power supplies, plug-in integrated circuits, and track record drives. In software, code could be written in modules (objects) that can be combined into various combinations. In fabrication modular strategy is applied as flexible platforms for creation a significant number of product variations , enabling a firm to gain cost savings through economies of scale from component commonality, inventory, logistics, as well as to introduce technologically improved products more rapidly.Modular architectures allow firms to minimize the physical changes required to achieve some functional changes. Hence all the physical changes can be easily combined without adding complexity to the manufacturing system and, hence, to managerial system. To explore the concept of modularity and consider it in the framework of supply chain management, we decided to compare the differences between integral and modular product architecture and make elevate comparisons between corresponding supply chain architecture.Product architecture. Integral product architectures are those in which each component is provided straight off and specifically to overall performance. part and interfaces tend to be proprietary. On a highly integrated product like a military aircraft, every part and system has been desig ned to perform a specific task. Modular product architectures use standard interfaces and can employ off-the-shelf components for much of assembly. Personal computers, clothing, and many other products employ modular architectures12.Supply Chain Architecture. Integral (traditional) supply manacles require vertical integrating within a primary firm or tight coupling of several firms in order to meet demanding, proprietary design specifications. Modular supply chain architectures are horizontal, with many competing firms specializing in aspects of the overall product. In other words, modularity in supply chains implies that the various units of organizations are freely divided, can operate independently, may be easily reconstructed.The concepts of product modularity and supply chain modularity are rather interconnected changes in the product architecture result in important implications for the supply chain structure and re-distribution of activities crosswise the logistics networks . This figure 2 shows us the simple scheme of interconnections of final assembler and its suppliers in traditional supply chain and modular supply chain. (2) (1) put down 2. Simplified scheme of integral supply chain (1) and modular supply hain (2) In modular supply chain starting tier suppliers are providing modules in the form of subassemblies, are not only components, therefore a modular supply chain is characterized by the straw man of value-adding tier-suppliers that coordinate the work of the second tier suppliers. In non modular supply chain the role of assemblier is played only by a local firm. In the result of rather different approach, modular supply chain fosters some distinctions comparing to the traditional one. In the following table we compare the main features of supply chain depending on its mode of organization. Table 2Main features of supply chain depending on its mode of organization11 Traditional supply chain Mass customization supply chain Interface compati bility effects * Integrated vertical structure * Long development lead times * Modular product architecture * Reduction of development lead time Component customization * Design and manufacturing focus * In-house product development * Standardized components * Autonomous innovation in NPD * Customer focus * Design for manufacturability Value inputs * Economies of scale * Exploiting advantages of market mechanism * normalisation of operations * Consolidation of outbound logistics * Outsourcing * Flexibility towards specific customers needs * Economies of scale and scope Supplier-buyer mutualness * Supplier involvement in development not critical * Multiple sourcing * Early supplier involvement in NPD * strategical partnership * Supplier as system integrator * High interdependence The good example of applying modular strategy in practice is the following.Two German automotive companies, Volkswagen and Mercedes-Benz decided to develop the auto industrys modularization in the mid-1990 s. Their built new plants, which started production in 1996 and 1997 according to the new modular concept on a comparatively large scale, specifically at Volkswagens plants in Resende (Brazil), Boleslav (Czech), and Mosel (former East Germany), and Mercedes-Benzs plants in Vance (U. S. ) and Hambach (France). These plants had two main features. One is that they have assembled cars from comparatively large subassemblies. As we can know a car is a system made up of numerous components. At conventional plants, individual components for example, instrument panels, gauges, and wire harnesses one by one to a fomite body on the final assembly line.Instead, at those new plants, these individual components are subassembled on a separate line, and then installed as a module into a body on the final assembly line14. Suppliers get their own materials and labor force to create separate modules, while Volkswagen provides the foundation and designs the interface between manufacturing units. Th ese measures let companies reduce their costs, because on its new plants there were no need in blue collars (administrative staff), for instance, and its modular outsourcing made significant advantages which are resulted in an ability to issue a wider variety of final products in shorter time periods and at lower cost. Types of modularityThere are six types of modularity for the mass customization of products and services * component-sharing modularity, * component-swapping modularity * cut-to-fit modularity * mix modularity * bus modularity * sectional modularity. The following characteristics of different types of modularity are done by contemporary authors who are mostly referring to Ulrich and Tung study Fundamentals of Product Modularity (1991). We supposed it is convenient typology and decided to base barely information on this ground (figure 3). In component-sharing modularity, the same component is used transversely in different products to provide economies of scope.There is a base unit of common components and changeable part. This kind of modularity never results in true individual customization, but allows reducing costs and increasing variety of products. token 3. Types of modularity In component-swapping modularity it is possible to change options on a standard product. Modules are selected from a list of options to can be added to a base product, for example cars. The good example for this is the Configurator on the internet site of Volkswagen, where customers can choose superfluous features which can be added to the base model with several clicks. So customer can make a decision which is convenient for him.Cut-to-fit modularity is similar to component-sharing and component-swapping modularity, however that one or more of the components is shifting. The module can be changed before it is combined with other modules. The good examples for it are eyeglasses, or clothing. Mix-modularity is also similar to component-sharing and component-swappi ng modularity, but is distinguished by the fact that when combined, the modules lose their unique identity. An example is house paint. When particular colors of paint are mixed together, those components are no longer visible in the end product16. Bus modularity uses a main platform that can add different components to it.So in the result there is the infrastructure that is really required for each consumer. Sectional modularity is the type of modularity that provides the biggest variety and customization among other types of modularization. Functionally it is rather close to component swapping, but focuses on arranging standard modules in a new, unique form16. In this case each component is connected to another making doable the configuration of any number of different types of components. The most popular example is Lego. To be able to use this type of modularity a manufacturer has to develop a special interface of its product that allows sections or objects of different types to interlock16.Benefits and drawbacks of modularity, requirements for implementing of the concept Taking all into consideration we can list main benefits of modular strategy * Economies of scale and scope which mean an ability to improve overall performance of production concentrating on divided modules. Suppliers and sub-suppliers have an chance to produce higher volume of its modules and apply its core-competencies to production. * Increased possibility of product/component change and updating. Since each module interface is strictly specified, changes can be made to a module independently of other modules, as so as it is wider open for further product development. * Reduced order lead-time.Since modules are manufactured in relatively large volume, the logistics of production can be organized so as to reduce manufacturing lead time. Hence, the order lead time can be reduced. * Development of product variety. The use of modules office that a great product variety can be achieved usi ng different combinations of modules. * Separated tasks. Since the interfaces and modules have been standardized, their interfaces enable design tasks and production tasks to be decoupled. This dividing can result in reduced task complexity and in the ability to complete tasks in parallel. For instance it is easier to test it before final assembly, quality management can become more efficient due to separated modules. The ease of product upgrade, maintenance, repair, and disposal. Customer without any problem can change one module to another, for example he can buy an improved video card for his computer, or change an engine module in his automobile17. Although applying modular design provides a number of advantages across the organization, companies moldiness also consider the less wrangleed drawbacks when evaluating the decision to implement modular design or reviewing existing modular processes. * High Initial Investment. The initial costs to reconfigure existing systems and pro cesses are high. Reconfiguring to the modular design is a complex task, which may disrupt the existing flow of the product pipeline. Lack of Customer-Centricity. Focusing on cost-efficiencies company can lose go across vision of customer needs. * Coordination Complexity. Modular design requires a significant restructuring of processes and can increase product development complexity if companies do not assign clear ownership and collaboration with suppliers in a well-planned implementation process to avoid duplication of processes and disagreement across product specifications, purchase orders, and manufacturing plans. * Supplier Risk . Companies can pose delays, incorrect specifications, and poor material quality. Hence there is a urgency of well-organized control in this case.Also, companies may have to share information and technological expertise to ensure suppliers deliver according to new specifications and cost. A company surrendering too much technical expertise, especia lly in areas that provide a competitive advantage, may lose technical control to the supplier * expert Property Risk. Producing modules simplifies the product architecture, enabling competitors to recognize without difficulty technologies and copy modules. According to that, organizations essential increase patent documentation to prevent competitors using key modules in their product architectures. In modular supply chain management, suppliers have a relatively high degree of freedom in production.However it is possible only with long-term commitments and aggressive cost goals. It is clear, that modular strategy has its basic requirements for the suppliers and manufacturers which enable them work together to create value. To implement modular strategy company should be able to meet such requirements, as following * Particular organization structure. The organization structure should be flatter with fewer levels, and creates a freedom for the coordination among processes (modules) . It focuses on a high degree of cross-functional integration and employee participation. This results in a much higher degree of decentralization in decision making.Besides, the structure is open to suppliers as well as customers because they (suppliers and customers) are considered extensions of the organization * Management focuses on three parts supplier relation, customer relation, and resource management * Readiness of inputs when needed (this requires an effective supply network), skillful, highly educated employees with excellent technical qualifications * High standardization of components. Also adjusting a companys organizational structure with a modular product architecture requires the constant support and enduring responsibility of the top management. The level of quality control and coordination in development of modules should be in a high level.Effective development and efficient use of modules requires changes in the existing processes in many ways. Modularization i n automotive industry (Volkswagens modular strategy) As usual, the automotive industry is a leader in implementing and communicating a modularization strategy. The Volkswagen Group is characterized by its global presence and comprises numerous brands. The Volkswagen Group bases its great success on three major modules which are shared out on a broad scale. The successfully use modularization strategy is one of the key factors which will enable the Volkswagen Group to become the world leading car manufacturer, not only in terms of sold units but also in terms of superior margins8.Now The VW Group is a large automotive empire encompassing 10 brands, 240 models produced across 94 sites in 153 markets, totaling over 8. 3 million vehicles made each year. The sheer scale of its operations across so many different countries meant that variability of its products is very high. Applying of modular strategy by Volkswagen meets customers expectations for a growing variety of vehicle models, equipment features and design. with the modularization of the body, vehicles can be produced in different stages for the length, width and wheelbase an approach that benefits the manufacturing process. Well discuss the main features of Volkswagen modular strategy created in its Modular Transverse Toolkit (MQB) in the next chapter.To sum up, companies that are striving to be competitive and still want to have a relatively high profit margins and market shares in our case can choose mass customization strategies and modular strategies in particular because * Modularity makes complexity manageable * Modularity enables parallel work * Modularity is tolerant of uncertainty. overlap platform strategies in the framework of international supply chain management. By Alexander Manzhosov Abstract The logical order of development of international markets, industries and customers conduct led businesses to a new frontier of competition for manufacturing industries as well as for service indus tries to Mass Customization.The core reason for such a change in the market concept was a dramatically increase in diversity of consumers needs within market segments. And as the world recognized guru of management Peter Drucker once said Its a customer who determines what a business is. Its the customer alone whos willingness to pay for a good or for a service converts economic resources into wealth, things into goods. Translated to the real terms that meant for the manufacturers a new challenge of meeting various customers needs while carrying on following to basic trends of reducing costs and development times of a product and optimizing core business processes.Thats why platform strategies were designed and applied to increase the efficiency and favorableness of manufacturing. This paper seeks to identify the phenomenon of shared platform strategies, research their advantages and disadvantages for supply chains and study the consequences of implementing the strategy on the ca se of Volkswagen Group. Key words mass customization, shared platform strategies, supply chain. Introduction Many modern manufacturers are seeking new ways to improve their Key Performance Indicators (KPI) and concentrating their facilities on cost reducing while offering the collection of competitive goods in many different market segments. And one of the methods of achieving this goal is by implementing shared platforms approach.The benefit is possible to be gained because of coordinating of engineering processes with the actual production system and supply chains. The platform allows companies to share not only components, but also production tools and machinery. Thus our first effort to establish the basis of the concept of sharing platforms among the family of products is to define the term platform. After that there is a further problem of realization in which way does the concept affect the company and how the enterprise can get a competitive advantage by mean of implementing shared platform strategies. Platform concept The ideas of sharing platforms have received increasing attention in product development and operations management in the time when mass customization era arose.So companies had to produce goods and services to meet individual customers needs with near mass production efficiency. The platform concept is closely tied to models of product architecture, modularization and standardization. The platform itself can be be as a relatively large set of product components that are physically connected as a stable subassembly and are common to different final models. The definition has been stated above can be clarified by Figure 4. Figure 4. Three different products build on the same platform The figure illustrates the general idea of platforms sharing. Three different products are assembled by combining elements A, B, C, D, E.According to the illustration it can be concluded, that this product family consists of the element A (platform) and a se t of other elements used in a modular way. What emerges from the definition and illustration that in general designing a platform is about creating common shared components and systems throughout a family line, while providing differentiate features and benefits to add value to each production unit (Figure 5). Figure 5. jet principle of sharing platforms . The trick here is that totally different at the first sight products from different brands and from different price segments of the market can be equal in engineering terms.Still the platform is not a universal cure. And based on empirical evidence there are some preconditions of implementing platforms * The product family shares basic groups of elements * The product family is supposed to have a long lifecycle * The level of interconnected systems among the product family is relatively high * The technological environment of the market tends to constant updates * The core functionality of the products is stable but variable in the terms of non-core functions All these criteria are not ultimate and the suitability of decisions taken depends on specificity of organizations type and the product characteristics as well.It also should be added, that depending on criteria mentioned above and the target of the manufacturer, platforms can be categorized into 3 types * Modular * Scalable * Generational The main difference by such a categorizing emerges owing to the strategy of launching the product line. The modular platform usually allows designing functionally different product variants. On the contrary, scalable one aims at creating functionally equal products of many capacities. And the last one, the propagational platform is used to be a basis for new generation development. The reasons of implementing platforms It follows from what has been said above, that the platform concept is a quite flexible approach for manufacturers, moreover sometimes it seems vital for staying competitive on the market.And now we can pass on to the issues closely related to the platform implementation and its consequences for the companies operations and supply chain structure. Nowadays critical issues for consideration in the Supply Chain Management (SCM) are cost containment, development know-how and resources, product quality and logistics. As the supply chain can be correspond as the combination of enterprises involved in activities from the supply of raw materials to the manufacturing and delivery of the goods to the customers, the success of the whole supply chain depends on how to generate the most efficient configuration of the products, manufacturing processes and supply sources. In this connection a question is bound to arise whether the shared platform approach is an effective method or not.This brings us to advantages and disadvantages of such a scheme. Advantages and disadvantages of implementing shared platform strategies The purpose with platform sharing is to reduce the cost and have a more efficient product development process. And according to the purpose announced from m point of view its possible to classify advantages of shared platform strategy into three key groups * Quantitative * Qualitative * Customer-oriented Quantitative advantages by this mean include such factors as 1. The Global standardization 2. The parsimoniousness of scale 3. The rationalization and the reduction of R&D costs The value of the standardizations is quiet obvious.By creating a common platform for the product line the company creates flexibility, which allows not only to produce dissimilar models according to individual customers and even countries tastes but also provides an opportunity to standardize production facilities and streamline logistics and management as well. The economy of scale in this case follows directly from the previous factor the commonality of the exploiting components, modules, mechanisms, assembly lines reduce overall costs and simplifies the business and technolo gical processes within the company sparing human and pecuniary resources. The next important issue concerns R&D costs. The unity of components under one single platform helps dramatically minimize the cost of developing product lines. Once the platform is designed, the company doesnt need to spend millions on engineering new components.And platform efficiency the ratio between the average R&D costs (or development time) for derivative product over the cost (or time) spent for the platform increases (the lower the ratio the more efficient the platform is). Such an effect is possible because different products share the same technology process, structure and production mechanisms. Qualitative advantages include 1. Increased quality and innovations 2. Easer inventory management The proposed components commonality is a multi-oriented tool platform sharing allows manufacturers to design parts with fewer variation. A byproduct of this is increased quality, which results in lower defect r ates.On the other hand, people want value for their money they want new technologies. And eliminating the need to engineer separately thousands of parts allows research and development assets to be focused on fewer technologies procreation innovation and quality improvements in the minor set of technologies. One more critical point is inventory management. Its apparent that in any supply chain a tremendous amount of inventory is held in the form of components. And its essential to mention that the inventory amount corresponds always to the uncertainty of demand for the finished product. In that way by implementing a platform the manufacturer is able to use it in multiple finished products.So the demand for the platform and all components the platform consists of is an aggregation of the demand for all cross-platform finished products. Thats why the use of common components (or set of components platform) in a variety of products has been a very effective supply chain strategy to exploit aggregation and reduce component inventories. Another clear benefit concerns the relations between suppliers and manufacturer. By implementing platforms the producer decreases the uncertainty of demand on different components. That creates a win-to-win situation for both business partners by enabling them to build long-term relationships. The last group of advantages is customer oriented and includes 1. Faster response to ever-changing market needs 2. Greater product varietyIts critical to mention, that this group of pros can be clearly defined through observation on previous advantages. And faster response to changing market needs occurs because platform sharing allows manufacturers to design and launch new products faster and cheaper. And the trick is here that the development and cost of the original platform for new goods have already been paid for. Such flexibility provides an opportunity to the company to diversify its assortment and satisfy different market shares. Ho wever its impossible to complete the study without highlighting some possible problems when using platform approach 1. Product dilution 2. Incompatibility 3. Risk concentrationProduct dilution means that a platform, depending on the common machines and systems, can be extended thin if it becomes a source of too many disparate models. Moreover, platforms that span across models of different stature increase the risk of cheapening luxury products or adding unnecessary cost to lower-end segment. Another challenge is incompatibility. A platforms differentiating technologies must be carefully engineered to integrate with the standardized systems. Otherwise, producers will have to perform modifications to make the two types of technologies compatible. These compatibility regulations first of all are not differentiating modifications and second they provide zero value of their own to the finished product. The last but not the least possible problem is the risk concentration.Producers may face greater overall risk if the underlying platform theyve developed and implemented is accident-prone. A defect in a standardized technology multiplies the risk across the whole product line, which leads to expensive potential recalls. Shared platform strategies As has been indicated, in general implementing a platform promises much more benefits than negative consequences. And once the decision to implement platforms is considered, there are various strategies for the product implementation (Figure 6). Some of the most widely practiced platform strategies are No Leveraging, Vertical Leveraging, Horizontal Leveraging and the Beachhead Approach. Figure 6. Shared platform strategiesNo Leveraging platform is usually designed especially for a single market segment. Such strategy is implemented for high scale goods wi