Manufacturing StrategyRef. “The Strategy Concept & Process” by Arnoldo C. Hax

Version 4, April 29 2015 

Denis Bourbonneux

Manufacturing Strategy Manufacturing Intelligence Facilities Capacities

Vertical Integration

Process Technologies

Product Scope & New Product Introduction

Supplier Relation

Quality Management

Manufacturing Organisation and Managerial Infrastructure

Human Ressources Denis Bourbonneux

Manufacturing Gap Analysis

H

M

L

L M H

Busin

ess

Impo

rtanc

e

Functionnal Capability (how good we are)

Facilities

Capacities

Vertical Integration

Process Technology

Supplier relation

Product Scope

Manuf. Intelligence

Manuf. Org.

Quality

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Strategy : Matrix of ResponsabilitiesTopic Mr A Mr B Mrs C Mr D Mrs E

Manufacturing Intelligence

X

Facilities XCapacities XVertical Integration

X

Process Technologies

X

Product ScopeIntro New Product

X

Supplier relation X XQuality Management

X

Manuf. Organization & Managerial Infra.

X XDenis Bourbonneux

Manufact. Intelligence : DefinitionA manufacturing strategy must be comprehensive and based on corporate and business objectives. Normally, manufacturing objectives are expressed in term of the three major dimensions : Cost / Quality / Delivery. EH&S is considered as a fourth dimension in some industries such as Chemicals and Nuclear.

Implementation of manufacturing startegy can be difficult because changes in short-term operating policies often have uncertain long-term effects.

Manufacturing intelligence allows a clear approach ofo the industrial activities of the company (Manufacturing

Units)o the manufacturing development of competitors

Manufacturing Intelligence also gives a comprehensive statement of internal procedure to conduct manufacturing deployment in the company. Denis Bourbonneux

Facilities : Definition Facitities decisions are long-term, « cast-in-concrete » manufacturing decisions. A key step in devising policies for a multifacility organization is choosing how to specialize or focus each facility. Facilities may be focused by geography, product group, process type, volume or stage in the product life cycle.

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Capacities : DefinitionImportant decisions include how to deal with cyclical demand, add capacity in anticipation of future demand or in response to existing demand : “Reactive” Incrementation to “ProActive” Incrementation

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Vertical Integration : DefinitionA larger system affects operations as coordination by managers becomes more complex.Such decision involve replacing a market mechanism (with limited control) by an internal mechanism. Before making such decision, a firm must be sure that it can design and control an internal mechanism that will be more effective than the market mechanism it replaces.

Market mechanism : operation made by supplier or contractor

Internal mechanism : operation made by the company

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Process Technologies : DefinitionThe traditionnal approach has been to choose among the principal generic process type by matching product characteristics with process characteristics. Robotics have made decisions more complex. Highly automated factories can be extremely expensive. In many cases, such advanced technology can drastically change manufacturing cost structure, capital intensity, unskilled labour usage.Process technologies can also impact plant organization and employees management Operator driving several machines

Operator dedicated to only 1 task

Process Technologies must be adapt to the product life cycle time (see next slide).For products in the last step of life cycle time, a continuous flow process is prefered.

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Product-Process Life-Cycle MatrixContinuous

flow

Connected line flow

(assembly line)

Disonnected line flow

(batch)

Jumbled Flow (job shop)

Low Volume – Low

standardizationOne of a kind

Multiple product – Low volume

Few major products, higher

volume

Commodity products –

high standardizatio

n

Proc

ess

Stru

ctur

e

Product structure – Product life-cycle stage Denis Bourbonneux

Product Scope & New Products Iintroduction : DefinitionManufacturing management is strongly influenced by the range of products and processes, and the rate of new product introduction. Manufacturing management has significant input into decisions about product scope and new products.

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Supplier Relation : DefinitionThere are 2 popular but opposed views on purchasing and supplier-relations strategy : the competitive approach and the cooperative approach :

Competitive approach recommends multiple sources.

Cooperative approach recommends long-term relationshipss based on mutual trust.

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Quality Management : DefinitionA strategy in quality requires zealous support from top management, a well-articulated philosophy and concrete objectives. It must specify how responsabilities are allocated and measurement system. To be sucessfull, a quality program must be a permanent and on-going process applied troughout the organization.

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Manufacturing Organization & Managerial Infrastructure : DefinitionA solid organizational infrastructure is essential to support decision making and implementation and requires : Planning and control system, Operating policies and Well-understood lines of authority and responsability. An organization can decide if centralization or decentralization of authority is more valuable for the business.In managing materials, firms should consider MRP and Just-in-Time (JIT) system.In aggregate planning, the firm must decide how to match productive capacity to variable demand on a medium-term horizon (12 to 18 months). The firm should decide what is make-To-Stock and Make-To-Order products.

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15

Human Ressources: DefinitionA strategy in HR requires zealous support from top management, a well-articulated philosophy and concrete objectives. Human ressources strategy must evaluate if the organization want to develop highly educated or low-skills employees. It can depend from the region where the company operates. It can be influenced by the type of process used and requirement from the market.

A HR strategy also clarifies how the organization strutures compensation program and bonus program.

HR also create training/development program for each key function in the organization.

HR startegy for manufacturing is often defined in the global HR strategy for the company.

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Exemple of KPI Manufactured Quantities Tons Sales Turnover € Direct Labor / Working Hours Hrs Variables Costs € Margin on Variable Costs % Destruction Costs € Gross Profit % Productivity Kg/Hrs Net Inventory € COGS Days Days Maintenance Capex € On Time In Full % Customer Claims # Right First Time % Accident #

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