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Summary
Nowadays the customer demand instant fulfillment of their needs, another trend is increased the demand for tailor made products. The changing customer demand poses an interesting challenge for the production of these goods. The customer order decoupling point (CODP) is the point in production at which the product is produced for a specific customer taking the customer specifications in account. As such the phenomena has gained increased attention.
The choice for the CODP is one of -the many- strategic decisions that have to be made when designing a production process as it relates to the processing order, timing and efficiency. Thereby, it creates an interesting tension field between marketing, sales, product quality and production. This tension field results in an interesting variety of perspectives about the CODP.
The most important result of implementing a CODP is that the material flow is divided into two sub processes: the pre- and post-CODP processes. The CODP can be placed in different positions in the value chain. By this placement the respective lengths of the pre- and post-CODP processes is determined. There are four commonly acknowledged post-CODP positions, which on their place correspond with different CODP strategy names. These four strategies are: Make-to-stock (MTS), assemble-to-order (ATO), make-to-order (MTO) and engineer-to-order (ETO).
These CODP strategies describe the traditional view of production and engineering as a sequence where the engineering (or design) precedes the production. In this sequential view it is impossible to start with production activities before the final design is known. By separating engineering and manufacturing it is possible to consider the production value added activities and the engineering value added activities to be non-sequential. As a result, six 2-dimensional perspectives on COPD can be formulated. With the production CODP positions in one dimension and the engineering CODP’s on the other dimension.
There is a strong consensus that pre- and post-CODP operations differ significant. Consensus can be found in literature on how the processes perform on process characteristics as efficiency, flexibility and lead time. On the basis of the characteristics, main motivators for upstream and downstream shifting can be derived: The main drivers for upstream shifting are reduction of customer lead time and increase the production efficiency. The main driver for downstream shifting is to increase the knowledge of the customer order at the time of production. Besides the difference in process characteristics, there is also a significant difference in (organizational) attributes. The attributes are a derivative of the production characteristics, and provide a general understanding of the attributes found in practice.
2 For the positioning of the CODP different methods exist. The found methods can be placed in three categories. The first based on a trade-off between the pre- and post-CODP characteristics. In other words if the CODP is shifted backwards the process will inherit more post-CODP characteristics and if the CODP is shifted forwards more pre-CODP characteristics are inherited. The second method is based on the P:D ratio. This ratio describes the relative time needed for production and the time the customer need has to be fulfilled. The general view is that the CODP cannot be shifted further backwards than the point where these the production time equals the demand time. The last method is based on specific production characteristics. The general idea is that based on some dominant production characteristics a practical position should be found. Typical production characteristics associated with this method are product diversity, capacity bottle neck and relative production cost.
In most cases the CODP is considered as a fixed point, however companies discern more than one CODP strategy in their production processes. This non-fixed CODP phenomena has led to a differentiated view on the COPD in literature, the dynamic CODP. The idea behind a dynamical CODP is that the optimal placement of the CODP depends on the circumstances of the specific moment. The three main sets of circumstances addressed are operational hybridity, long term hybridity and assortment hybridity.
The CODP is often mentioned in association with two operational paradigms, being mass customization and leagile production. The goal of mass customization is to combine mass production with high product variability. In mass customization one of the most important parameters is the entry point of the customer order. Thus the positioning of the CODP plays a central role in mass customization. In leagile production the process is divided in a lean and agile process. The division between these processes is the CODP. Therefore the CODP also plays a central role in leagile production.
Although there is a general consensus on the phenomena and the characteristics associated with the CODP, the methods for placing the CODP differ in literature. The general perception is that CODP is, strategically positioned static point in the process. However in practice a dynamical CODP is often used. Although no winning CODP blueprint can be comprised, strategically positioning of the CODP is an powerful tool in an operations engineer toolbox. This literature review has provides an insight of the possibilities offered of this tool.
To put all the arguments given in perspective the central question should be “does it create more value overall?”. Whether more value is created depends on the specific cost-buildup of production and the specific revenue-buildup of sales. Which are unique for every company, thus making each CODP consideration unique.
