3 misconceptions about Lot Size One_
16-03-17

3 misconceptions about 'lot size' one

With the rise of e-commerce, manufacturers are feeling the hot breath of customers in their neck who expect them to deliver highly customized products very quickly. This not only applies to the B2C segment, but also to B2B suppliers. Most Sales & Marketing departments are big fans of this individualized service approach, but for Supply Chain it can sometimes feel like a nightmare. However, expanding the product portfolio with customer-unique products – so-called ‘lot size one’ products – doesn’t have to radically change the supply chain operation. In order to demonstrate that, I want to invalidate some misconceptions which are currently labeled as truth by a large part of the market.
Today, lot size one is perceived to be limited to specific products, such as high-tech or fashion items. However, I see applications in many fields, e.g. chemicals and fast-moving consumer goods.

Misconception 1: lot size one is only possible for certain types of products or sectors

Today, lot size one is perceived to be limited to specific products, such as high-tech or fashion items. However, I see applications in many fields including, for example, chemicals and fast-moving consumer goods (FMCG). While FMCG products on supermarket shelves are indeed not individualized, we are certainly seeing increased customization a step earlier in the supply chain (i.e. in the B2B part). Whereas manufacturers used to ship their pallets of goods to the retailer’s central depot, today they are increasingly delivering directly to the stores themselves. In that case, the package is specifically tailored to the end consumers.

Misconception 2: Industry 4.0 is the only way to handle lot size one

The more upstream in the supply chain one is, the more important it becomes to use innovative processes to accelerate the time to market. So, for certain industries, increased automation through robotics and IT is surely an enabler, but that doesn’t mean it is an absolute requirement. By pushing the decoupling point as far as possible along the supply chain and building in more agility from the moment customization is needed, organizations can make highly individualized products without big investments in the newest technology.

For example, I’ve worked with a manufacturer that produces optical sensors for a broad range of customers, from aerospace devices to cameras. The production of the optical sensor itself is quite a standardized process, but the casing around it varies widely. To avoid constant changeovers in its own production unit, the manufacturer works with subcontractors to take care of the customization. Ultimately, the manufacturer’s added value lies in the production of the sensor, not in the casing surrounding it.

Besides subcontracting, it can also be very useful to implement proven technologies, such as Supply & Operations Planning (S&OP) tools with embedded forecasting optimization or multi-echelon inventory capabilities.

What many companies struggle to cope with today is the expectation of fast or even same-day delivery, often also for highly individualized products.

Misconception 3: Lot size one implies a complete turnaround of existing processes

Lot size one doesn’t mean you have to manufacture all products to order. To a great extent, it’s about the customer perception you create. Think of Dell, for example; the processes to produce its computers are highly standardized, but customers perceive Dell’s service as extremely individualized – even though it amounts to little more than basic components which are assembled at the end of the supply chain for each specific customer.

What many companies struggle to cope with today is the expectation of fast or even same-day delivery, often also for highly individualized products. This increases the pressure on the supply chain. However, new technologies can offer a solution. Footwear manufacturers, for example, can opt to 3D-print the soles. It’s fast and it’s customized, plus it only requires a limited investment at the end of the supply chain.

Keep an open mind

Today, a lot of organizations continue to adhere to standardized products, just because they want to be able to deliver quickly and are afraid of big investments and major repercussions for their supply chain. I advise all companies to keep an open mind: experiment with lot size one and don't be too quick to dismiss new product ideas as being impossible in the current supply chain set-up.

 

Author: Nicolas Maes. You can follow Nicolas on Twitter or connect with him on LinkedIn