Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

4.4.2 Features in Reference to a Product: Depth and Orientation of the Product Structure, and VAT Analysis

Intended learning outcomes: Present important features and possible values referring to a product. Differentiate between a convergent product structure and a divergent product structure. Disclose the VA analysis within the VAT analysis.

Figure shows the first group of features.

Fig.        Important features and possible values referring to the user and the product or product family.

The depth of product structure is defined as the number of structure levels within the total supply chain for the product, whether company-internal or transcorporate.

Product structure and structure level are defined in Section 1.2.2. The depth of product structure is dependent on the product. A deep product structure is usually also “wide”: in each structure level, many components are put together. Such complex products usually entail complex planning & control. The depth of product structure is thus also a measure of the complexity of planning & control in the supply chain (see also [Albe95]). This complexity influences planning & control in each of the companies involved in the supply chain. See the feature depth of product structure in the company in Section 4.4.3.

The orientation of product structure indicates whether in one single production process a certain product is manufactured from various components (symbol ▲, convergent product structure), or whether in one single production process various products are made out of a certain component (symbol ▼, divergent product structure).

  • Convergent product structure is often used as a synonym for discrete manufacturing, that is, the production of distinct items such as machines or appliances. It is also called assembly orientation. The triangle pointing up symbolizes a tree (or arborescent) structure, as the product structure, such as that in Figure
  • Divergent product structure is often used as a synonym for by-products arising in continuous production (see Section 4.4.3). In chemical or oil production, which are typical examples from the pro­cess industry, processing of the basic material yields — in one single process — several active substances as well as waste or by-pro­ducts. In the food industry, there are by-products that, through re­cycling, can be used as basic materials in another production process (such as scrap chocolate). The triangle pointing down symbolizes an upside-down, arborescent structure as the product structure. Note that a divergent product structure should not be con­fused with the multiple use of a component in different products.
  • “▲ on ▼”: This is a product with divergent product structure at lower structure levels, and convergent product structure at higher structure levels. The (lower) chemical level of pharma­ceutical products, for example, has a divergent product structure, while the (higher) pharmaceutical level has a convergent structure. Other ex­amples are products made from sheet metals. Many semi­finished goods arise simultaneously from the sheet metal through pressing or laser cutting, and they are then used for various end products.

Determining the values of this feature corresponds exactly to a part of the VAT analysis (the “VA part”):

VAT analysis determines the general flow of parts and products from raw materials to finished products. A V structure corresponds to the divergent product structure (the letter V has the same shape as the symbol ▼). An A structure corresponds to the convergent product struc­ture (the letter A has the same shape as the symbol ▲). A T structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts. See the feature product variety concept below.

A note on “▼ on ▲”: This sometimes symbolizes an end product having many variants and therefore addresses the T structure mentioned above. In the lower structure levels, semifinished items are put together as modules. In assembly, many variants of end products are built from the semifinished goods or subassemblies. This is the case with automobiles. But because final assembly is clearly based on an assembly-oriented, convergent product structure, it should not be represented by the upside-down triangle. It is not the case that several products will arise from a particular semi-processed item. Although the symbol may be used quite commonly for this case, it is used incorrectly. A separate feature for describing the variant structure is the product variety concept. See below.

Continuation in next subsection (4.4.2b).

Course section 4.4: Subsections and their intended learning outcomes