Evaluation of manufacturing system redesign with multiple points of product differentiation

This paper presents a cost model for evaluating the redesign of manufacturing systems with delayed product differentiation (i.e. postponement). In addition to considering multiple points of product differentiation, the proposed model explicitly includes the operational delay cost of intermediate (semi-finished or generic) products waiting at points of postponement because of inefficient scheduling or insufficient capacity, as well as the penalty cost of late-delivered and cancelled orders owing to stockout. This operational delay cost may be particularly prominent in continuous production systems with delayed product differentiation, and is critical in analysing the trade-off between the waiting delay of end products in push-based systems and the operational delay of intermediate products in push-pull systems. This cost model was adopted to analyse the cost and benefit of the postponement strategy implemented by a large copper strips manufacturer in Taiwan. In this case, both manufacturing and logistics postponements were adopted in the redesigned manufacturing system, which involved a third-party logistics service provider. The results demonstrate that the benefits of implementing postponement are largely owing to the reduction in inventory related costs. In addition, we found that both penalty cost and operational delay cost account for a significant portion of the total cost saving resulting from implementing the postponement strategy, whereas no previous models have included these two cost items.