Implementation of delayed differentiation in batch process industries: a standardization problem

Abstract

Postponement consists in holding some activities in a supply chain until customer orders are received, these activities being differentiation manufacturing process or distribution activities. The delayed differentiation consists in maintaining products in an undifferentiated state as long as possible during the manufacturing process. This approach permits firms to be more responsive and other advantages that are often mentioned are risk-pooling and lead-time uncertainty reduction. Industrial applications of postponement mainly concern automotive or computers industries (large assembly systems). This paper studies the implementation of delayed differentiation in batch process industries. First, the addition of an intermediate stock is proposed between the two main stages of a process, which leads to an important reduction of the lead-time, but the inventory cost can be prohibitive. Reducing this stock gives rise to a standardization problem. Second, a standardization of the component types in the intermediate stock is performed to make this stock economically profitable. A 01 linear-programming model of the standardization problem is proposed. This model takes into account costly batch resources: standard components are chosen in order to optimize the use of batch resources. An industrial application of this approach is presented (an aluminium-conversion industry). In this case, a drastic reduction of components in the intermediate stock is performed since the number of component is reduced from about 100 to eight standard components.