DePuy a changing market. Fisher (1997) demonstrated that

DePuy Synthes faces the challenge of not
only being flexible enough to tackle demand changes and overcome threats of
smaller competitors that offers products with similar technology but in a
faster way; but also, being still efficient to produce at competitive costs. A
wide spread of literature establish that efficient production is best achieve
with lean manufacturing; while flexibility is the primary objective of agile
manufacturing.

Lean manufacturing is defined by Shah
and Ward (2007) as “an integrated socio-technical system whose main objective
is to eliminate waste by concurrently minimizing or reducing supplier, customer,
or internal variability”, thus it is categorized to limit inventory, eliminate
system variability and allow the system to operate at full utilization without
building inventory (Womack et at., 1990). In contrast, the primary objective of
agile manufacturing is to develop responsiveness by the ability to change state
of processes when conditions change, through flexible operations such as rapid
product changeovers, product customization, and efficient scales production (Narasimhan
et al., 2006). In addition to have different objectives, these two practices
differ significantly with respect to their treatment of variability. Suri
(2010) explains that lean techniques aim to eliminate all variability in the
manufacturing system, while agile techniques aim to eliminate only
dysfunctional variability, which is caused by errors, ineffective systems and
poor organization; and keep the strategic variability that an organization uses
to maintain its competitive edge in the market.

Although these two manufacturing
practices have different objectives and treatments of variability, some lean
and agile practices overlap considerably. Practices such as reducing process
lead time, minimizing setups, doing cross-training, and forging closer
relationships with the suppliers have the objective to keep work flowing rather
than building up inventory (Narasimhan et al., 2006). 

Depending on the customer needs and
market changes, DePuy Synthes must balance between the level of efficiency and
flexibility desired to compete in a changing market. Fisher (1997) demonstrated
that depending on the characteristics of the product, such as life cycle,
demand predictability, product variety, lead times and service levels; a
fundamental different supply chain is required. He classified products as functional
or innovative. Functional products are defined as having predictable demand,
long life cycles, and low profit margins due; thus, inviting companies to
choose low-cost suppliers. The supply chain proposed for functional products
should be efficient rather than flexible; thus, focusing on minimizing physical
costs, like cost of production, transportation, and inventory storage. On the
other side, innovative products are considered as having short life cycles,
high profit margins and volatile demand. These kind of products needs a
flexible supply chain that reduces market mediation costs, including cost of
excess supplies when company needs to pay for inventory holding and risk of
obsolescence, and cost of shortage when supply falls short to demand, resulting
in loss of sales and dissatisfied customers. This nomination remains
qualitative and can be subject to error from manager’s perspective.  

Shorter lead times are a source of
supply chain responsiveness and competitiveness for an organization that has a
large variety of products, with low-volumes, customized products (Suri, 2010), and are highly
profitable with high demand volatility (deTreville et al., 2014b,a; Fisher,
1997). Considering the case of Flextronics, a supplier of medical cases for
DePuy Synthes, its portfolio is characterized to have high-variety of products
(1149 active SKU’s) (in an organization that has an average number of items per
supplier of less than 100), with low-volume demand (95% of active codes have an
average demand of one unit per week) and with high-demand volatility (85% of
active codes have a coefficient of variation of more than 0.7). Having a
high-variety of medical cases increases the possibility to be in any type of
orthopaedic surgery, resulting in a competitive advantage for the company.

Suri (2010) proposes to use Quick
Response Manufacturing (QRM) to reduce dysfunctional variability, which is
aligned to the lean approach, but exploit strategic variability through lead
time reduction in all aspects of a company’s operations, both internally and
externally. QRM is defined by Suri (2010) as “a company-wide strategy for
reducing lead times throughout the enterprise”. QRM strategy is based on fourth
principles. First, a time-based mindset installed throughout the organization
to focus on time-reduction activities rather than cost-reduction efforts.
Second, the organization structure must support flow. Third, system dynamics
principles such as capacity utilization, batch size and process time
relationships must be understood and exploit. Fourth and last principle is the
enterprise-wide application of QRM principles, which goes not only to the shop
floor but to the entire organization.    

Hopp and Spearman (2001) evaluated
the mathematical principles that underlie lead time and observe that a
production system must be in balance between capacity utilization, work in
process and variability of the system. This approach was referred to “factory
physics”, which emphasized that any variation of the process must be compensate
either by adding a capacity buffer or by increasing inventory. Therefore, for an
organization that is looking to exploit strategic variability, the use of
buffers creates responsiveness through buffers that pursue strategically
valuable and variable demand; and efficiency through reduction of non-strategic
variability (Yin et al., 2017). 

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