In a majority of Network design exercises, the focus is on finding the most cost optimal network , give various business constraints. However, as I have mentioned in my multiple posts earlier, there are so many aspects of network design that are not quantifiable. Incorporating some types of risk mitigation strategies in your network design or building some amount of flexibility in your network are good examples of such non quantitative aspects.
Keep in mind that these options may not be optimal from a cost perspective but are essential to a robust network design.With manufacturing footprints going global, demands getting spread across geographies and the pattern of demand landscape ever evolving, you need a flexible manufacturing network.
There are various approached to achieve flexibility in Supply Chain networks. However, from a manufacturing network perspective we can focus on achieving flexibility through Interchangeability. Interchangeability is the foundation to building a flexible network since it pertains to standardization of parts, processes and manufacturing systems. Having a flexible manufacturing network means that your network is resilient, your network is not disrupted and the flows are seamless in the Supply Chain even in the case of major disruptive events.
Note that the strategies being discussed here are focused primarily on network design/structure. There are additional ways of building flexibility (like keeping extra inventory, extra capacity, reducing manufacturing lead times, being strategic about product mix etc.) which we will not cover in this post.
Also, in the examples, Products A,B,C etc. can represent individual products as well as product groups.
The Traditional approach-Focus factories (or dedicated systems)
Focus factories have been the traditional approach in Manufacturing networks till recently and have their pros. They allow large lot sizes and economies of scale. Also, the workforce gets specialized in the dedicated process and hence develop an expertise in manufacturing the specific product. This leads to higher productivity. Such a scenario is shown in the illustration below where each product is manufactured exclusively by one plant and the plant specializes in that product.
As you can imagine with this kind of network, you essentially don’t have any risk hedging, in case one of your focus factories get disrupted. Also, if there are unexpected demand surges while your focus factory has already been operating at its peak, you don’t have options to respond to those demand surges.
So what is the best way to build a flexible network? In an ideal world, you would want that your every plant can manufacture all products. Such a network is shown below.
As you can imagine, this is generally not a feasible or practical option because of various reasons. First and foremost, it will be really expensive to build such a network. You lose your economies of scale, your labor expertise and your transportation costs will increase.
So what is a feasible solution?
A feasible solution is a solution somewhere between dedicated and total flexibility, and is generally referred to as Chaining strategy. An example of a chaining strategy is shown below. This is kind of a hybrid between dedicated systems and total flexibility and as you can imagine, is more realistic strategy to attain.
In this strategy/design, one factory mimics the manufacturing system of another or you can say that there is a backup plant for each plant. This approach is more feasible to implement and provides the flexibility you may need in disruptive circumstances. It also retains some of the benefits of focus factories like economies of scale and labor expertise.
This article covers manufacturing flexibility only but if your network has extensive distribution foot print as well, you need to build flexibility into your distribution network also.
Disclaimer: This is a personal blog site and views and perspectives expressed here are solely my own and do not express the views or opinions of my employer.