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1 Available online at ScienceDirect Procedia CIRP 20 (2014 ) nd International Conference on Ramp-Up Management 2014 (ICRM) Ramp-Up Management as an Approach to Mitigating Instability in the Adaptation of Solution Spaces in High-Variety Business Environments Frank Steiner a * a RWTH Aachen University, Templergraben 55, Aachen * Corresponding author. Tel.: ; fax: address: steiner@time.rwth-aachen.de Abstract In today s markets companies are oftentimes forced to offer a broad product variety, so that they can meet the individual requirements of their customers. Being confronted with such high-variety business environments, suppliers need to practice solution space development, i.e. understanding the customers idiosyncratic needs and deriving a suitable set of product variants from this knowledge. The diversification of customer demand must not lead to an ill-considered proliferation of variants in a firm s product offering, but any reconsideration of an existing product portfolio has to be done in a careful and purposeful manner: offering limitless choice is economically unfeasible and product variety should only be offered for those product attributes along which customer needs diverge and that can be aligned with the existing product architecture. However, due to unexpected changes in customer preferences, technical turbulences or faulty interpretations of the manufacturer during the development of the initial product offering, an adaptation of the existing solution space of product variants might become necessary at any given time. Whenever such a misfit between the existing product offering and the current customer demand occurs, firms are forced to introduce new product variants to the market. Such an addition of product variants may disrupt the available manufacturing system and cause significant instabilities in the respective value creation processes. This paper investigates whether the implementation of ramp-up management can mitigate the negative effects of this instability The Elsevier Authors. B.V. Published This an by open Elsevier access B.V. article under the CC BY-NC-ND license Selection ( and peer-review under responsibility of the International Editorial Committee of the "2nd International Conference on Ramp-Up Management" Selection and peer-review in the person under of the responsibility Conference Chair of the Prof. International Dr. Robert Editorial Schmitt. Committee of the 2nd International Conference on Ramp-Up Management in the person of the Conference Chair Prof. Dr. Robert Schmitt Keywords: Ramp-Up Management; Solution Space Development; Product Variants; Ramp-Up Instability 1. Introduction In many markets a recent trend of increasing heterogeneity of customer needs can be observed [1]. In response to such a diversification of the customer demand, companies are oftentimes forced to offer a broad product variety, so that they can meet the individual requirements of their customers [2]. Being confronted with such high-variety business environments, suppliers of industrial goods need to establish new business models that are capable of dealing with high levels of heterogeneity, such as mass customisation [3, 4]. Existing research claims that such a transition towards a highvariety product strategy requires far-reaching changes in the organisational structure of a firm [3-7]. In order to be able to cope with this transition companies have to develop certain strategic capabilities across all parts of the value creation process in order to align their activities with the heterogeneous needs of the customers [7]. One capability that is described in literature as a potential key factor for establishing such a high-variety business model is termed solution space development (SSD), i.e. understanding the customers idiosyncratic needs and deriving a suitable set of product variants from this knowledge [7]. The diversification of customer demand must not lead to an illconsidered proliferation of variants in a firm s product offering, but any reconsideration of an existing product portfolio has to be done in a careful and purposeful manner: offering limitless choice is economically unfeasible [4] and product variety should only be offered for those product Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( Selection and peer-review under responsibility of the International Editorial Committee of the 2nd International Conference on Ramp-Up Management in the person of the Conference Chair Prof. Dr. Robert Schmitt doi: /j.procir

2 Frank Steiner / Procedia CIRP 20 (2014 ) attributes along which customer needs diverge and that can be aligned with the existing product architecture [7-10]. The importance of solution space development becomes apparent in the cost implications that may result from shortcomings in the development of a suitable product offering: excessive variety causes unnecessary costs of maintenance for each unwanted product option that is kept available [11]. On the other hand, firms will suffer from missed sales opportunities for all product options that have been excluded from the product offering despite existing customer demand [12]. However, due to unexpected changes in customer preferences, technical turbulences or faulty interpretations of the manufacturer during the development of the initial product offering, an adaptation of the existing solution space of product variants might become necessary at any given time [13, 14]. Whenever such a misfit between the existing product offering and the current customer demand occurs, firms are forced to introduce new product variants to the market. Such an addition of product variants may disrupt the available manufacturing system and cause significant instabilities in the respective production processes [15]. This paper shows that ramp-up management can serve as a suitable approach to mitigating the negative effects of instability that have been induced by rearranging the solution space in a high-variety business environment. Furthermore, recommendations will be made concerning a suitable organisational set-up of ramp-up management in such business environments. 2. Developing High-Variety Solution Spaces Naturally, every company has to make decisions concerning its respective product offering. However, this task is characterised by a much higher level of uncertainty and decision complexity, if the product domain at hand is of a rather heterogeneous and volatile nature. Subsequently, the level of product variety that customers demand in a specific market, can be regarded as an indicator for the task complexity of solution space development and its implications for ramp-up management The Role of Product Variety Recently, the need for high-variety product offerings seems to be of growing importance. Customer needs have become increasingly heterogeneous and the demand for a broader variety of goods and services that is capable of meeting these heterogeneous customer needs is strongly increasing [1]. This shift in the customer demand structure leads to significant increases in product variety across many different industries. A recent study of ROLAND BERGER STRATEGY CONSULTANTS [16], for example, shows the development of product lifecycles and product variety in five major industries, namely automotive, chemicals, fast-moving consumer goods (FMCG), machinery and pharmaceuticals. According to the study s results product variety in these industries has more than doubled within the past 15 years. Thereby, the FMCG industry faces the lowest increases (+62%) and the chemicals industry is confronted with the most drastic development (+213%). The remaining industries show similar developments of product variety: automotive (+70%), machinery (+116%), pharmaceuticals (+123%) [16]. In the light of this development, it becomes apparent that firms need to adapt organisationally to these high-variety business environments by establishing standardised mechanisms for the delineation of suitable product offerings and the execution of the respective production ramp-ups. However, even though product variety has increased so drastically, STICH [17] claims that there is no existing research on ramp-up management that specifically takes the interplay between product variety and ramp-up stability into account [17]. Considering the importance of ramp-up management in the automotive industry (a sector that is obviously highly impacted by increasing levels of product variety) [17-20], the lack of research concerning the impact of high-variety products on ramp-up management comes as a surprise. With regard to the development of a suitable product offering, however, managers can benefit from research on the strategic approach of mass customisation. This specific strategy is designed for the implementation in high-variety business environments and, thus, has certain recommendations concerning solution space development readily available The Solution Space Development Capability In the context of mass customisation, the task of selecting an appropriate product offering is called solution space development and SALVADOR ET AL. [7] define it as identify[ing] the product attributes along which customer needs diverge. The result of solution space development should be a choice menu of product features or product attributes that customers can choose from in order to customise products that meet their individual customer needs [8]. This also corresponds with the argumentation put forward by VON HIPPEL [9], who regards the solution space as the freedom of choice that the manufacturer s production system allows the customers. Subsequently, for the further course of this paper, we define the solution space as the sum of all available product variants in a company s product offering. However, the development of a solution space in markets with high levels of heterogeneity has to be clearly distinguished from product portfolio decisions in the context of more homogeneous business settings [4]: as mass production aims at reaching as many customers as possible with standardised products, manufacturers have to develop products that address common needs among all targeted users. In product domains with high customer need heterogeneity, on the contrary, firms need to identify those product attributes along which customer needs diverge the most [7]. These product attributes can then be used as a starting point for the generation of product variety for mass customisation that truly adds value for the customers [21]. The definition of a suitable solution space requires certain external and internal considerations: externally, the company has to develop a comprehensive understanding of the

3 34 Frank Steiner / Procedia CIRP 20 ( 2014 ) customisation options that are technically feasible and it has to gain insight into the diverse needs of the potential customers [22]. Internally, solution space development has to take the existing manufacturing resources into account and product managers should consider at all times how specific decisions concerning the solution space will impact the production [23]. Thus, solution space development has to bridge the heterogeneous customer needs on the one, and the manufacturing capabilities of the company on the other hand [24]. However, we define solution space development exclusively as the conceptualisation of a high-variety product offering for mass customisation. This means that this task does not include aspects of product design or the definition of a respective product architecture. The ultimate target of all SSD efforts should be the enhancement of the fit between the existing product offering and the customer requirements of the market within the boundaries of the existing manufacturing capabilities [4, 9]. However, enhancing or even maintaining this level of fit poses a task of utmost difficulty in the context of heterogeneous markets, as the respective decision making processes are strongly influenced by uncertainty [25-28]. In this context, management literature suggests to mitigate the impact of uncertainty by separating the respective decision making process into sub-tasks [29]. Following this notion, in an earlier paper we suggest adopting a two-step procedure for the purpose of defining a suitable product offering, by differentiating between initial solution space development (ISSD) and adaptive solution space development (ASSD) [30]. In this paper we define ISSD as the sum of all activities that are necessary to define an assortment of those product variants that will be made available at market launch, whereas ASSD is defined as the sum of all efforts that are directed at assessing the market fit of the existing solution space and making potentially necessary changes to this offering [31]. These two concepts initial and adaptive SSD are organisational mechanisms, which can help companies coping with highly heterogeneous and volatile customer needs. However, before firms can benefit from such mechanisms, the necessary knowledge and skills have to be acquired and implemented over time. In this context, STEINER and WELLIGE [32] provide an extensive list of managerial activities and organisational resources that firms can apply in order to strengthen their ISSD and ASSD capabilities. Thereby, it becomes apparent that solution space development is not a one-off activity, but rather requires a continuous evaluation and adaptation of existing product offerings. Only if companies regularly reconsider the level of fit of their existing solution spaces, they can react adequately to potential disruptions of the firm environment, such as unforeseeable changes in customer demand. 3. Production Ramp-Up for High-Variety Environments The term production ramp-up describes the phase within new product development (NPD) that starts with the first preproduction tests on the full scale series production facilities and ends with reaching the planned output target level [20]. In [production] ramp-up the firm starts commercial production at a relatively low level of volume; as the organisation develops confidence in its (and its suppliers ) abilities to execute production consistently [...], the volume increases. At the conclusion of the ramp-up phase, the production system has achieved its target levels of volume, cost, and quality, [33, p.8]. One possible approach to cope with this issue is the implementation of a specialised ramp-up management, which has the task of conducting efficient and effective ramp-ups [34].Thereby, the purpose of the ramp-up phase is the identification and solving of problems, which have not been detected during NPD and prototype testing [35]. Such unexpected problems may arise during ramp-up, as there are usually discrepancies between the original processes that were tested in a laboratory-like environment and the actual processes that will be used in full scale production [36] Instability During Production Ramp-Up There are many potential influencing factors that drive the complexity of the ramp-up task, such as the product itself [37]. Thereby, a major challenge in establishing a generic framework for ramp-up management [38] lies within the high complexity that arises during the ramp-up process: the manufacturing system is composed of a multitude of interdependent factors such as technologies, products and logistics and requires different functional areas and suppliers to cooperate. All these influencing factors occur simultaneously in the course of production ramp-up [37]. In consequence, ramp-up management is facing a highly complex manufacturing system that constantly bears the danger of unexpected problems or technical issues, which in turn could lead to increases in tact times, machinery downtimes or increases in faults per unit [36, 39, 40]. Such unexpected problems during ramp-up inevitably lead to instability of the manufacturing system: downtimes and variations in tact times cause unintended and oftentimes erratic changes in the ramp-up process. Such instabilities may cause unexpected system states of the manufacturing system that are beyond the tolerable limits of the planned ramp-up curve. In consequence, the production ramp-up may become less efficient and ultimately the company may not be able to meet pre-defined ramp-up targets such as delivery times, output volume, manufacturing costs or quality standards. In this context, existing research distinguishes two kinds of ramp-up instability: instability of the run-up and instability during the run-up [41]. Instability of the run-up is related to the overall aim of a successful rampup process, which is marked by reaching the output target level. If a run-up can be completed by reaching the planned manufacturing volume within tolerable limits of time, cost and quality, the ramp-up process is completed successfully and the stable manufacturing process can be handed over into the responsibility of the manufacturing department [41]. Instability during the run-up, on the other hand, relates to the pre-planned ramp-up curve. If the parameters of the ramp-up process are beyond the tolerable limits determined by the

4 Frank Steiner / Procedia CIRP 20 (2014 ) ramp-up curve at any point of time during the process, the process becomes instable [41]. Instability as a result of unexpected problems during the production ramp-up is one of the most critical issues that a successful ramp-up management has to address. As shown above, unexpected changes in customer preferences or similar disruptions of the market can make an adaptation of the existing solution space of product variants necessary at any given time. However, any such addition of new product variants may disrupt the existing manufacturing system and cause significant instabilities during the run-up. Subsequently, it can be stated that heterogeneous and volatile customer needs require a specific form of ramp-up management, which is capable of mitigating the negative impact of frequent adaptations of the solution space. In the following, respective requirements and their implications for the ramp-up management of firms that face high-variety business environments will be derived Requirements and Implications for Ramp-Up Management As described above, high-variety business environments are characterised by a high degree of uncertainty and frequent changes in customer needs. These characteristics result in a specific requirements pattern for ramp-up management. In the following, four typical requirements will be derived from literature and respective implications for ramp-up management will be discussed. Firstly, literature on solution space development highlights the need for a continuous screening of the fit between an existing high-variety product offering and the customer needs [30, 31]. Whenever this screening should identify a lack of fit, new product variants may have to be introduced to the rampup process. Thus, high-variety business environments require a ramp-up management that is available on short notice. This requirement cannot be met by a project-based ramp-up management. Instead, ramp-up management should be embedded permanently in the organisational structure of a firm, so that certain routines and mechanisms are readily available whenever adaptations of the product offering become necessary. This suggestion follows the argumentation of TYRE and HAUPTMAN, who claim that successful change depends on the deployment of organisational structures and mechanisms that enable individuals to work collectively across organisational and functional boundaries to identify problems and develop solutions [42, p.314]. Secondly, existing research on SSD shows that the task of maintaining a high-variety product offering that is in line with the current customer needs requires detailed technical knowhow as well as comprehensive knowledge about customer needs [30, 31]. In order to have such a broad information basis available, firms should try to utilise the knowledge from different functional areas such as marketing, research & development, as well as the manufacturing function. In this context, NPD literature highlights the integration of different supply chain entities (internal and external) as a prerequisite for a successful and robust manufacturing [43]. Subsequently, ramp-up management in high-variety business environments should be organised in the form of interdisciplinary teams, integrating different functional areas of the organisation as well as external partners such as suppliers and customers. This is in accordance with existing literature on NPD projects, which suggests different methodological approaches for this functional integration, such as concurrent engineering, design for manufacturing and assembly, lifecycle engineering, or integrated product design [44]. Thirdly, the above-presented discussion on adaptive SSD clearly indicates that many tasks of ramp-up management are of a reactive nature: whenever unexpected problems arise during the run-up, ramp-up management should come into action in order to solve the problem [37]. In case of a misfit between the existing solution space and current customer needs, it is very likely that the ramp-up management has to take corrective action with regard to the product itself [45]. However, as the respective family of products has already been launched to the market, all necessary changes have to be made directly at the manufacturing or assembly lines. From an organisational perspective this means that ramp-up management cannot be executed exclusively in a test environment such as a separate ramp-up learning laboratory [36], but needs to be integrated with the existing manufacturing system. Lastly, the specific requirements of high-variety business environments also yield implications for the choice of a suitable ramp-up strategy. SCHUH ET AL. [38] define four different ramp-up strategies: Slow-Motion, Volume First, Dedication and Step-by-step. Out of these four strategies, the step-by-step approach seems to be the most suitable for product domains that are characterised by highly heterogeneous and volatile customer needs. Whereas, the two strategies of dedication and step-by-step are both applicable in the context of high-variety offerings, the step-by-step approach allows a decoupled problem identification for each newly introduced product variant [46]. Subsequently, we recommend a step-by-step introduction of new product variants in a high-variety business environment. 4. Discussion The paper discusses the specific requirements for solution space development and the respective implications for rampup management that arise from the growing importance of high-variety business environments. In this context it becomes apparent that high levels of customer need heterogeneity oftentimes make regular adaptations of the solution space necessary and thus bear the danger of ramp-up instability. Subsequently, firms in such high-variety environments need to establish a ramp-up management that is capable of mitigating the negative effects of these instabilities. However, existing research does not provide a clear recommendation on how such a ramp-up management should be embedded in the organisational context.

5 36 Frank Steiner / Procedia CIRP 20 ( 2014 ) For this purpose, the paper provides an overview of specific requirements of high-variety business environments and derives respective recommendations for the set-up of a suitable ramp-up management. Specifically, the paper makes four recommendations concerning the organisational realisation of an appropriate ramp-up management approach: firstly, ramp-up management should be a permanently installed function in the organisational structure of a firm. Secondly, this ramp-up management function should be organised in a manner that makes use of interdisciplinary teams, which integrate different functional areas as well as external expertise. Thirdly, ramp-up management cannot operate exclusively in separate ramp-up test environments, but needs to be empowered to directly impact the production and assembly lines of the existing manufacturing system. 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