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

4.4.2b Features in Reference to Customer and Product Family: Frequency of Customer Demand and Product Variety Concept

Intended learning outcomes: Present important features and possible values referring to the customer demand and the product variety concept. Differentiate between continuous demand and discontinuous demand. Explain the product variety concept. Disclose the T analysis within the VAT analysis and its relation to the product variety concept.

Continuation from previous subsection (4.4.2)

Frequency of customer demand means the number of times within defined observation time periods that the entirety of the (internal or external) customers demand a product or product family. Demand is

  • Unique, if it occurs only once within an observation period
  • Discontinuous, lumpy, or highly volatile, if many observation periods with no or very little demand are interrupted by few periods with large, for example, times higher demand, without recognizable regularity
  • Regular, if it can be calculated for every observation period according to a certain formula
  • Continuous or steady, if the demand is about the same in every observation period (e.g., daily)

This feature determines the options for repetitive frequency of the corresponding production and procurement orders. This in turn will determine the basic business methods and procedures for planning & control.

If longer observation periods are chosen, the frequency of customer demand can change, tending toward continuous demand. However, shifts and dips in demand within the observation period in this case will be unknown. For its purposes, planning & control can assume that the total demand occurs at the start of the observation period.

The product variety concept determines the strategy for developing the product and offering it to the customer. Where applicable, there may also be a product variety concept for semifinished goods.

The product variety concept allows the producer to respond to customer requests to varying degrees of variant orientation. The individual values are defined as follows:

  • An individual or standard product is offered to the customer “in isolation,” that is, with no reference to other products in the range. These are “off the rack” products, or “standard menus.” These products have their own complete product structure.
  • Standard product with options: Here, the number of variants is small. A variant can be an additional feature of one and the same basic product. Each variant has its own product structure along with that of the standard product. Many examples are found in the machine industry.
  • Product family: Compare here the definition in Section 4.1.2. In gastronomy, this value of the product variety concept is comparable to combining various appetizers, main dishes, and desserts to form an individual menu. Example industrial products are appliances and tools.
  • Product family with many variants: The potential number of various products that can be produced in a product family can lie in the thousands or even in the millions. Production starts with raw materials or various components, but with an identical process. Variability of the process is achieved by CNC machines or by the workers themselves. Representation of the product structure requires a generic structure to overcome data redundancy problems and to reduce the administrative efforts for defining orders and maintaining the product structure. Product families with many variants are comparable to prêt-à-porter in the fashion industry. Some examples are automobiles, elevators, appliances, and machines with variable specifications, complex furniture, or insurance contracts.
  • Product according to (changing) customer specification: In contrast to the product family, here at least some design work occurs during delivery lead time, according to customer specification. Usually, the product will be similar to a “mother product,” meaning a product that has been delivered before. The product structure and the process plan will be derived and adapted from the “mother version.” This value of the product variety concept is comparable to haute couture, whereby a creation is made to order for the individual customer. Examples can be found in the manufacturing of facilities (plants), such as the building of exteriors or refineries.

A subcategory of this value is the degree of change in customer orders, where product and process structures change after the start of production.

Elaborating the values of the feature product variety concept can be considered to be a more detailed analysis of the T structure within VAT analysis.

T analysis describes the product variety. Qualitatively, the length of the crossbeam of the T stands for the number of product variants.

Figure shows the idea of T analysis.

Fig.        T analysis within the VAT analysis and its relation to the product variety concept.

The product variety concept stands in relation to other features. This will be discussed in the next section. As a rule, the complexity of planning & control increases with the number of different products produced. It is not, however, dependent on the number of variants, but rather on the number of product families having differing characteristics. Based on the definition of a product family, it is clear that all of its members can be described by one and the same characteristic. However, planning & control becomes more complicated with an increasing degree of product variety and, of course, with the degree of change in customer orders.

Continuation in next subsection (4.4.2c).

Course section 4.4: Subsections and their intended learning outcomes