lecture 3 - manufacturing strategy 20150915

7/25/2019 Lecture 3 - Manufacturing Strategy 20150915

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Manufacturing strategyAntti Salonen

KPP319

2015-09-15

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KPP319 Industrial Excellence


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Manufacturing strategy guides long

term development of manufacturing

Production development realizes

the manufacturing strategy

Simulation as a tool applied in

production system development

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Manufacturing Strategy

Production

Development

Simulation

KPP319 Industrial ExcellenceCourse Approach

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What is a strategy?

A classic definition:

Top managements plans to attain outcomes consistent with

the organizations missions and goals!


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A plan:

A direction or guideline

A plan for future actions

A path from here to there (the intended scenario)

A strategic planning horizon is typically 3-5 years

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A pattern:

The pattern of actions over time (historic actions)


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Historic actionsAction plan

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Historic actionsAction plan

Is this how it really works?

?


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A position:How the company positions on a market

A perspective:Company branding (action patterns)

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Market

Company

Corporatevision


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A trick:

A ploy or scheme towards the competitors

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Why strategies?


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Strategy sets direction

Pro: the organization gets cohesive

Con: the organization gets blinders

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Strategy focuses effort

Pro: the organization coordinates activities

Con: may lead to groupthink


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Strategy defines the organization

Pro: the co-workers find identity

Con: the organization gets stereotype

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Strategy provides consistency

Pro: the organization gets less ambiguous

Con: decreases the creativity


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so, what is strategy?

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A strategy is the pattern or plan that integrates an organizations

major goals, policies and action sequences into a cohesive whole. A

well-formulated strategy helps to marshal and allocate an

organizations resources into a unique and viable posture based on its

relative internal competencies and shortcomings, anticipated changes

in the environment and contingent moves by intelligent opponents.

(Mintzberg et al. 1999, p.5).

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Formulating strategies

Effective formal strategies contain three essential elements: goals to be achieved,

policies for guiding or limiting actions, and

the major action sequences that accomplish the defined goals within

the limit sets.

Effective strategies develop around a few key concepts andthrusts, which give them cohesion, balance and focus.

Strategy deals not only with the unpredictable but also with

the unknowable.

All complex organizations should have a number of

hierarchically related and mutually supporting strategies.

These strategies must be more or less complete in

themselves.


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Company Vision and Mission

Describes the very idea of the enterprice

Are formulated in the business plan


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Branch competition

Negotiation strength

of the suppliers

Negotiation strength

of the customers

Threats from

substitutes

Threats from new

enterprices

Based on Porter, 2004

The companys market position: Porters five forces

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How to compete

Cost

Quality

Flexibility

Deliverability

Innovativeness


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Formulating strategiesS.W.O.T.

Company

Strengths

External

Opportunities

External

Threats

Company

Weaknesses

Positive Negative

Internal in

Company

Externa

l factors

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Road map

Here we

are

Here we

whish to

be


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OKWhat about manufacturing strategy?

Strategy hierarchy

Corporate

strategy

Business

strategy

Functional

strategy

Business

strategy

Functional

strategy

Functional

strategy

Functional

strategyFunctional

strategy

Functional

strategy


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Manufacturing strategy

Definition: the effective use of manufacturing strengths as acompetitive weapon for the achievement of business and corporategoals

from Mills et.al. (1995); Swamidass and Newell (1987)

The essence of manufacturing strategy is to formulate explicitly how

manufacturing decisions will be made so that manufacturing will help

the company achieve a long-term advantage over its competitors.Miltenburg (2005)

Process and content. How strategy is made and what constitutes astrategy

Formulating the manufacturing strategy

1. Determine the corporate

objectives.

2. Determine marketing strategies to

meet these objectives.

5. Provide the manufacturing

infrastructure to support production.

4. Establish the appropriate process

to manufacture these products

(process choice).

3. Assess how different products

qualify in their respective markets and

win orders against competitors.

Rudberg (2002)


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Framework for Manufacturing strategy

Corporate

objectives

Marketing

strategy

Order

-Qualifyers

-Winners


Process choice Infrastructure

Growth

Survival

Profit

Return on

investment

Other financial

measures

Product markets

and segments

Range

Mix

Volumes

Standardization

versus

customization

Level of innovation

Leader versus

follower alternatives

Price

Conformance quality

Delivery

Speed

Reliability

Demand increases

Color range

Product range

Design

Brand name

Technical support

After-sales Support

Choice of

alternative

processes

Trade-offs

embodied in

the process choice

Role of inventory in

the process

configuration

Make or buy

Capacity

Size

Timing

Location

Function support

Manufacturing

planning

and control systems

Quality assurance

and

control

Manufacturing

systems

engineering

Clerical procedures

Compensation

agreements

Work structuring

Organizational

structure

From Hill (2000)

Example of corporate objectives

Company xx will experience growth of at least 10 % per year.

Company xx will become market leader in Central Europe

Profitability: Operating margin of more than 8 % over the course of a

business cycle.

Our mission is to create effective Supply Chains, that satisfy our

Customers needs.

By motivated and competent personnel we will exceed the expectations

regarding continuous improving of material flows, product quality, choice

of vendors and realization of production plans.


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Order qualifyers

Qualifiers gain entry to and maintain a companys

position within a market but do not win orders.

Qualifiers have order-losing not order-winning

characteristics.

Need to identify qualifiers which

are order-losing sensitive

have potential to become order-winners.

Order winners

Not all order-winners are manufacturing-related

Typically as products mature, order-winners

become increasingly a manufacturing task

Order-winners and qualifiers are time and market

specific


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Process choice

Process choice is about choosing the right way to manufacture

products.

1. First the company must decide how much to buy from outside

2. Identify the appropriate engineering-technology alternatives to

complete the tasks embodied in each product so that the product

can be assembled with conformance quality.

3. Decide the manufacturing processes. Do the company have all

the needed machines, capacity, inventory etc.

Content model

Mills, et.al. (1995)

The Manufacturing strategy content

Competitive

priorities

Decision

criteria


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Content model

Competitive priorities the capabilities the manufacturing unit must have in order for the firm to

compete given the overall business and marketing strategy (Miller and Roth, 1994)

Decision areas

the pattern of manufacturing choices that a company make (Miller and Roth, 1994)

consisting of many individual decisions that affect the ability of the firm to meet

long term objectives (Leong et al., 1990)

Competitive priorities

Cost

Quality

DeliveryFlexibility

Innovativeness


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Competitive prioritiesCompetitive priorities

(with definition) Sample of measurement criteria

Cost Unit product/labour/material cost

Cost of material, labour, overhead,

and other resources to produce a Total manufacturing overhead cost

Product. Inventory turnover - raw material, WIP, finished goods

Capacity/machine utilization

Quality Internal failure cost - waste and rework

Quality is the extent to which

materials and operations conform External failure cost

to specifications and customer Consistent quality

expectations. Quality of incoming material from suppliers

Dependability

Conformance to specification

Delivery Quoted delivery time

Delivery time is the time between

order taking and delivery to the Percentage of on-/off--time deliveries

customer. Delivery reliability

Inventory accuracy

Manufacturing lead-time

Competitive priorities

Flexibility Number of part processed by a group of machines

Flexibility is the ability to decrease and

increase manufacturing of Number of products in the product line

existing needs. Companies should be Average production lot size

able to respond to changes at the Average volume fluctuation

market and changes of order Length of frozen schedule

quantities. Number of setups

Time of setups

Innovativeness Number of engineering change orders per year?

The ability to quickly introduce new Number of new products introduced each year?

products, processes or make design Lead time to prepare customer drawings

changes to existing products. Customization


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Decision areas

From Mills, et.al. (1995)

Decision areas

Human resource

Organization structure and control

Sourcing

Production planning and control Process technology

Facilities

From Miltenburg (2005), Manufacturing Strategy


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Decision areasDecision criteria Sample of Characteristics

Human resources Skill level

Mix of skilled and unskilled employees

Amount of training

Responsibility and participation in decision

making

Organisation structure and

controls Organisation structure

Centralised or decentralised manufacturing

system

The importance of line and staffHow managers are selected

Sourcing Numbers of suppliers and their capabilities

Relationship with suppliers

Procedure of deciding whether a product will

be produced internally or externally

Decision areas

Production planning and control Whether a push or pull system is used

Size of raw material, WIP and finished goods

When maintenance is done

Whether the systems are centralised or

decentralised

Process technology Amount of automation

Whether the technology is new or old

Whether to develop technology internally or

purchase it from external sources

Factory layout

Facilities Location of facilities

Size of facilities

Whether facilities are general purpose or

specialised

Capacity planning


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Competitive

priorities

Customer

needs

Market

positioning

Competitors

actions

Decision criteria

Manufacturing

Understanding markets

Required performance

Strategic decisions

Based on Slack and Lewis (2008)

Manufacturing strategies in Sweden

Used in larger companies

Less common in small/medium sized companies

Often poor alignment with corporate objectives

Suffers beccause of short term thinking

Not allways formally documented


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Reference literatureHill, T. (2000), Manufacturing Strategy Text and Cases, Second edition, New York: Palgrave

Leong, G. K., Snyder, D. L. and Ward, P. T. (2008), "Research in the process and content of manufacturing

strategy." Omega, Vol18, No. 2, pp. 109-122.

Miller, J. G. and Roth, A. V. (1994), A Taxonomy of Manufacturing Strategies, Management Science, Vol. 40, No.

3, pp. 285-304.

Mills, J., Platts, K. and Gregory, M. (1995), A Framework for the Design of Manufacturing Strategy Processes, A

contingency approach, International Journal of Operations and Production Management , Vol. 15, No. 4, pp. 17-49.

Miltenburg, J. (2005), Manufacturing strategy: How to formulate and implement a winning plan , New York:

Productivity Press.

Mintzberg, H., Ahlstrand, B. and Lampel, J. (2009), Strategy Safari, Second Edition, London: Prentice Hall.

Mintzberg, H., Quinn, J. B. And Ghoshal, S. (1999), The Strategy Process, Revised European Edition, London:

Prentice Hall.

Porter, M. E. (2004), Competitive Strategy: Techniques for Analyzinf Industries and Competitors: With a new

introduction, New York: Free press.

Rudberg, M. (2002), Manufacturingstrategy: linking competitive priorities, decision categories and manufacturing

networks. Production-Economic Research.

Slack, N. and Lewis, M. (2008), Operations Strategy, Second Edition, Harlow: Pearson Education.

Swamidass, P. M. and Newell, W. T. (1987), Manufacturing Strategy, environmental uncertainty and performance:

a path analytical model, Management Science, Vol. 33, No. 4, pp. 509-524.

lecture 3 - manufacturing strategy 20150915

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