EVALUATION OF MANUFACTURING STRATEGY

&

ROLE OF IT

1.0 Manufacturing strategy

The concept of manufacturing strategy is pioneered by Skinner. From Harvard Business

Review article in 1969 "Manufacturing- Missing Link in Corporate Strategy". Skinner suggested

a top-down approach to manufacturing. Manufacturing objectives should be derived from

business objectives, and then manufacturing policies developed to address these objectives.

In the past few decades countries like Japan, Germany and Italy deployed manufacturing

strategy in efficient manner to gain competitive advantage. Manufacturing objectives cover such

things as cost, quality, delivery and flexibility and usually there are trade-offs between them.

Trade-off decisions are also required in a number of key areas in order to support the

manufacturing objectives. Skinner identified five decision areas:

1) Plant and equipment

2) Production planning and control

3) Labor and staffing

4) Product design / engineering

5) Organization and management.

A manufacturing strategy is defined by a pattern of decisions, both structural and

infrastructural, which determine the capability of a manufacturing system and specify how it will

1Evaluation of manufacturing strategy &role of IT

operate to meet a set of manufacturing objectives which are consistent with overall business

objectives. [7]

1.1 Need for Evaluation of manufacturing strategy

Continues evaluation as performance measurement is of great need. As manufacturing is

complex system and it needs more time to change. The strategy must be evaluated to see the

penetration of strategically changes all parameter for making corrective actions. The

performance evolution is not similar with other depart of business. The need of Performance

evaluation tools for manufacturing strategy are

To access the current position of a strategy in manufacturing system.

Other strategy evaluation methods consider on ROI, Accountability or Assets. But basic

difference lies where other department believes inventory as assets but maneuvering

treats it as liability.

Other strategically evaluation reports are for the present like quarterly report, Attendance

report and appraisal report. But manufacturing is complex system. As it is complex the

strategies decided today are implemented in next two months. But the result like product

operating performance, on field failures is available after long time.

Prove the benefits of long term advantages as manufacturing is pressurized on short term

goals.

1.2 Measurable parameters of manufacturing strategies

Successful implementation of any manufacturing strategy can be studied based on

relevant production parameters. Objectives of manufacturing strategies will impact on

production parameters. These parameters necessarily need not have to be only from the

production department. Few production parameters are shown in table 1.

Manufacturing parameters Unit of measurement Areas

Labor efficiency % HR & Sales

Resource utilization % Manufacturing

Numbers of operators Numbers HR

Through put rate min Manufacturing

Internal distance travelled miters Manufacturing

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Raw material inventory Days Manufacturing

Work in progress inventory Days Manufacturing

Finished goods inventory Days Manufacturing

Floor to floor time/Dore to door time % Manufacturing

On time delivery % Marketing & sales

Product cost % Accounting

Scrap % Marketing & sales

Inspection time Hours/product Quality

Rework & rejections Hours Quality

Table 1 Measurable production parameters

1.4 Evaluation tools

1.4.1 Empirical research methods

This method evolves extensive research on Empirical observation or data are collected in

order to evaluate a particular strategic decision. Model works in 3 major steps

Research Questions: It includes quotations for the parameters which have to be measured.

Theoretical Models: To get empirically tested all question must transformed to a

theoretical model. Consisting of variables. The model will generated by analysis. This

model acts tool for both data collection and analysis.

Hypotheses: Hypothesis will define relationship between the selected variables.

1.4.2 Thin slicing

When a person is more experienced in particular filed, he does not need any tool for

measurement. This methodology can be used as tool for measuring implementation of strategy.

Author of Blink Mr.Glad well defines thin slicing as “our ability to gauge what is really

important from a very narrow period of experience. In other words, spontaneous decisions are

often as good as—or even better than—carefully planned and considered ones”

Gladwell says: "when making a decision of minor importance, I have always found it

advantageous to consider all the pros and cons. In vital matters, however, such as the choice of a

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mate or a profession, the decision should come from the unconscious, from somewhere within

ourselves. In the important decision of personal life, we should be governed, I think, by the deep

inner needs of our nature".

1.4.3 Activity based costing

Activity-Based Costing (ABC) is a costing model that identifies activities in an organization and

assigns the cost of each activity resource to all products and services according to the actual

consumption by each: it assigns more indirect costs (overhead) into direct costs. [2]

In this way an organization can establish the true cost of its individual products and services for

the purposes of identifying and eliminating those which are unprofitable and lowering the prices

of those which are overpriced.[2]

In a business organization, the ABC methodology assigns an organization's resource costs

through activities to the products and services provided to its customers. It is generally used as a

tool for understanding product and customer cost and profitability. As such, ABC has

predominantly been used to support strategic decisions such as pricing, outsourcing and

identification and measurement of process improvement initiatives. [2]

1.4.5 Balance score card

The Balanced Scorecard (BSC) is a performance management tool which began as a concept for

measuring whether the smaller-scale operational activities of a company are aligned with its

larger-scale objectives in terms of vision and strategy.

By focusing not only on financial outcomes but also on the operational, marketing and

developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive

view of a business, which in turn helps organizations act in their best long-term interests.

Organizations were encouraged to measure, in addition to financial outputs, those factors

which influenced the financial outputs. For example, process performance, market share /

penetration, long term learning and skills development, and so on.

The underlying rationale is that organizations cannot directly influence financial

outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the

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strategic control of the firm is unwise. Organizations should instead also measure those areas

where direct management intervention is possible. In so doing, the early versions of the Balanced

Scorecard helped organizations achieve a degree of "balance" in selection of performance

measures. In practice, early Scorecards achieved this balance by encouraging managers to select

measures from three additional categories or perspectives: "Customer," "Internal Business

Processes" and "Learning and Growth." [3]

Figure 1 Balance score cardp [1]

1.4.6 The performance pyramid

The Performance Pyramid has been developed by Dr. Douglas Brooks, Professor of

Education at Miami University and Director of Partners in Learning. The Performance Pyramid

is a web-based model for school district continuous improvement on proficiency tests and

systems implementation. The Performance Pyramid offers fourteen critical intervention areas

factored from statewide district continuous improvement intervention plans, Ohio Operating

Standards, and research-based practice.

The base areas of the Performance Pyramid are systemic interventions that support

learner performance interventions higher up in the Performance Pyramid.

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Figure 2 Performance pyramids [4]

1.5 Role of IT in performance evaluation of manufacturing strategy

Information technology has emerged as an agent of integration and the enabler of new

competitiveness for today’s enterprise in the global marketplace. However, has the paradigm of

strategic planning changed sufficiently to support the new role of information systems and

technology. For a long time relationship between information system functions and corporate

strategy was not of much interest to Top Management of firms. Information Systems were

thought to be synonymous with corporate data processing .Which were thought to replace top

management. [5]

Time period ERA CHARACTERISTICS Characteristics60s Data Processing (DP) Standalone computers, remote from

users, cost reduction function.70s to 80s Management Information Systems (MIS) Distributed process, interconnected,

regulated by management service, supporting the business, user driven.

80s to 90s Strategic Information Systems (SIS) Networked, integrated systems, available and supportive to users, relate to business strategy, enable the business -business driven.

Figure 3 The three era model of information technology

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A Strategic Information System (SIS) is a system to manage information and assist in

strategic decision making. A strategic information system has been defined as, "The information

system to support or changing enterprise's strategy.

A SIS is a type of Information System that is aligned with business strategy and structure.

The alignment increases the capability to respond faster to environmental changes and thus

creates a competitive advantage. An early example was the favorable position afforded American

and United Airlines by their reservation systems, Sabre and Apollo. For many years these two

systems ensured that the two carriers' flights appeared on the first screens observed by travel

agents, thus increasing their bookings relative to competitors. A major source of controversy

surrounding SIS is their sustainability. [5]

SISs are different from other comparable systems as:

They change the way the firm competes.

They have an external (outward looking) focus.

They are associated with higher project risk.

They are innovative (and not easily copied).

1.6 TPM track for performance evaluation

TPM-Trak is India's leading software/hardware machine monitoring products that help

increase production rates, increase OEE, reduce down-time losses, and reduce cost per piece and

to enhance capabilities of decision-making. Product is TS16949, ISO and QS compliant digital

cockpits and resources in their drive towards excellence. Product uses Industrial Ethernet

(rugged, industry standard) or Wireless (easy of deployment) for connectivity between your

shop-floor and PCs/servers. [6]

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Figure 4 Communication path of TPM track

In TPM Track uses Ethernet or RS-232 (JD1A or JD1B) communication channel. A

centralized computer is used to transfer the programs to required machines. This will enable

centralized data base for storing the programs which is strategically required while achieving

flexibility9to load any part on any machine).

The centralized system receives information’s like program starts time, End time,

Program number normally saved on component number and other operational parameters like

feed over ride, spindle override. The errors on the Machines are collated at central place to

evaluate the errors if requires effort form technical support. In Figure 5 typical error generated on

Mazak machine of plant 5 is centrally displayed. This evaluation will help in taking corrective

measures all across the company and rectify from happing of it again.

Figure 5 Error display on system [6]

The data availed from the machines will be processed and system performance parameters are

calculated. The available parameters from TPM track are

Number of machined parts

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MTBF (mean time between failures)

Predictive meantime information

Equipment utilization

Equipment efficiency

1.7 Conclusion

Manufacturing strategies are anticipation of future behavior of complete manufacturing

system. Strategies are always decided in toper level and executed in lower levels. Manufacturing

system being complex takes more time to change. Perhaps measuring selected production

parameters will help in accessing direction and degree of deployment of strategy.

When strategies are formed they must be monitored and evaluated at regular intervals of

time. Machine tool performance evaluation is strategically needed to reduce cost/unit is of great

importance. Proper measuring will allow organization to take necessary.

Latest IT based tools with combination of electronic circuitries will directly gather data

from machines. Process the acquired and data and give required information such as OEE,

alarms, resource utilization and sometimes directly production cost per unit.

Referencing

1. www.jiscinfonet.ac.uk/ tools/scorecard, Retrieved on 16 Feb 2009

2. http://en.wikipedia.org/wiki/Balance_Score_Card, Retrieved on 26 Feb 2009

3. http://en.wikipedia.org/wiki/Balance_Score_Card, Retrieved on 23 Feb 2009

4. http://www.executive-advice.co.uk/images/performance_pyramid_edited.jpg, Retrieved on 28

Feb 2009

5. http://viu.eng.rpi.edu/publications/strpaper.pdf, Retrieved on 18 Feb 2009

6. http://www.pioneerct.com/Solutions/prodTT.htm, Retrieved on 20 Feb2009

7. www.ifm.eng.cam.ac.uk/csp/summaries/ms.html, Retrieved on 20 Feb2009

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