STRATEGY and COMPETITIONSTRATEGY and COMPETITIONSTRATEGY and COMPETITIONSTRATEGY and COMPETITION

Production Planning and ControlProduction Planning and Control

Haeryip SihombingUniversiti Teknikal Malaysia Melaka (UTeM)

1BMFP 4513

Topic Areas of PPC CourseTopic Areas of PPC CourseTopic Areas of PPC CourseTopic Areas of PPC Course

• Aggregate Planning• Scheduling• Supply Chain• Simulation• Lean production• Management of Information System

Prerequisite topics:

• Forecasting

Functional Areas of the FirmFunctional Areas of the Firm

OperationsOperations(product design, manufacturing,

product quality, process efficiency, customer service,inventory management…)

FinanceFinance(views manufacturing

management as portfolio management risk reducedby diversification, by 1969, 70% of largest firms has

no dominant business)

MarketingMarketing(often conservative

product analysis,imitative/innovative,

IBM & Xerox)

What is Strategy ?What is Strategy ?What is Strategy ?What is Strategy ?

Strategy is a common vision that unites an organization, provides consistency in

decisions, and keeps the organization moving in the right direction

Time Horizons for Strategic DecisionsTime Horizons for Strategic DecisionsTime Horizons for Strategic DecisionsTime Horizons for Strategic Decisions

• 1. Long Term Decisions ( > year) Strategic decision– Locating and Sizing New Facilities– Finding New Markets for Products– Mission Statement: meeting quality objectives

• 2. Intermediate Term Decisions (weeks or month) – Forecasting Product Demand– Determining Manpower Needs– Setting Channels of Distribution– Equipment Purchases and Maintenance

• 3. Short Term Decisions (hours or days) Tactical decision– Purchasing– Shift Scheduling and Maintenance– Inventory Control

The Elements of StrategyThe Elements of StrategyThe Elements of StrategyThe Elements of Strategy

Decision Horizons of Manufacturing StrategyDecision Horizons of Manufacturing StrategyDecision Horizons of Manufacturing StrategyDecision Horizons of Manufacturing Strategy

History of Production and OMHistory of Production and OMHistory of Production and OMHistory of Production and OM

• Major Thrust of the Industrial Revolution 1850-1890–Factories tended to be small. Boss had total control. Little

regard for workers safety or workers rights.

• Production Manager Position. 1890-1920.–Frederick Taylor champions the idea of “scientific

management”.

• As complexity grows specializations take hold.–Inventory Control Manager–Purchasing Manager–Scheduling Supervisor–Quality Control Manager etc.

GLOBALIZATION COMPETITIONGLOBALIZATION COMPETITIONGLOBALIZATION COMPETITIONGLOBALIZATION COMPETITION

Global competition is heating up to an unprecedented degree. It appears that several

factors favor the success of some industries in some countries

For example:• Germany: printing presses, luxury cars, chemicals• Switzerland: pharmaceuticals, chocolate• Sweden: heavy trucks, mining equipment• United States: personal computers, software, entertainment• Japan: automobiles, consumer electronics

Famed management guru, Michael Porter, has developed a theory to explain the determinants of national competitive advantage. These include:

• Factor Conditions

(Land, Labor,Capital, etc.)

• Demand Conditions

(local marketplace may be more sophisticated/demanding than world marketplace)

• Related and Supporting Industries

• Firm Strategy, structure, rivalry

(e.g.: Germans are strong technically, Italian family structure, Japanese management methods)

Porter’s ThesisPorter’s ThesisPorter’s ThesisPorter’s Thesis

Time-Based CompetitionTime-Based CompetitionTime-Based CompetitionTime-Based Competition

“Time-based competitors focus on the bigger picture, on the entire value-delivery system. They attempt to transform an entire organization into one focused on the total time required to deliver a product or service. Their goal is not to devise the best way to perform a task, but to either eliminate the task altogether or perform it in parallel with other talks so that over-all system response time is reduced. Becoming a time-based competitor requires making revolutionary changes in the ways that processes are organized” (Blackburn(1991).

Being not only the first to market but the first to volume production as well gives a firm a decided advantage.

How Do Firms Differentiate Themselves from How Do Firms Differentiate Themselves from Competitors?Competitors?

How Do Firms Differentiate Themselves from How Do Firms Differentiate Themselves from Competitors?Competitors?

• Low Cost Leaders: Some examples include–WalMart and Costco in Retailing–Korean automakers (Hyundai, Kia, etc.)–e machines personal computers

• High Quality (and price) Leaders. Ex:–Mercedes Benz automobiles–Rolex Watches–(some firms do both: Chevrolet and Cadillac)

Understand TradeoffsUnderstand TradeoffsExample: Made-to-Order PizzaExample: Made-to-Order Pizza

Understand TradeoffsUnderstand TradeoffsExample: Made-to-Order PizzaExample: Made-to-Order Pizza

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QUALITYQUALITY & DESIGN

FLEXIBILITY

VOLUME FLEXIBILITY

TIMECOST

Some Dimensions of CompetitionSome Dimensions of CompetitionSome Dimensions of CompetitionSome Dimensions of Competition

• Re-engineering of the Business Process–Streamlining process

• JIT Deliveries–Cutting waste

• Time-based competition–Shortening time to delivery

• Competing on Quality

Business Process Re-engineeringBusiness Process Re-engineeringBusiness Process Re-engineeringBusiness Process Re-engineering

• The process of taking a cold hard look at the way that things are done. Term coined by Hammer and Champy in their 1993 book.

• Classic Example: IBM Credit Corporation. The process had been broken down to a series of multiple steps, each having substantial delays. Approval required from 6 days to 2 weeks. The process was re-engineered so that a single specialist would handle a request from beginning to end. The result was that turnaround time was slashed to an average of 4 hours!

Just-In-TimeJust-In-TimeJust-In-TimeJust-In-Time

JIT is a production control system that grew out of Toyota’s kanban system. It is a philosophy of production control (also know as lean production) that attempts to reduce inventories to an absolute minimum. It has become pretty much a standard way of thinking in many industries (especially the automobile.)

We will discuss JIT and its relationship to MRP in next session course.

The Product Life-Cycle CurveThe Product Life-Cycle CurveThe Product Life-Cycle CurveThe Product Life-Cycle Curve

The Product/Process MatrixThe Product/Process MatrixThe Product/Process MatrixThe Product/Process Matrix

So you have an idea what others do … and So you have an idea what others do … and you have a business idea…you have a business idea…

So you have an idea what others do … and So you have an idea what others do … and you have a business idea…you have a business idea…

OPERATION AS A SYSTEMOPERATION AS A SYSTEMOPERATION AS A SYSTEMOPERATION AS A SYSTEM

DECISION MAKINGDECISION MAKINGDECISION MAKINGDECISION MAKING

A Framework for Manufacturing StrategyA Framework for Manufacturing StrategyA Framework for Manufacturing StrategyA Framework for Manufacturing Strategy

Customer Needs

New and CurrentProducts

Performance Prioritiesand Requirements

Quality, Dependability,Speed, Flexibility, and Price

Operations & Supplier Capabilities

Technology PeopleSystems R&D CIM JIT TQM Distribution

Support Platforms

Financial Management Human Resource Management Information Management

Enterprise Capabilities

Strategic Vision

PRODUCTION SYSTEMPRODUCTION SYSTEMPRODUCTION SYSTEMPRODUCTION SYSTEM

CAPACITYCAPACITYCAPACITYCAPACITY

• Level of capacity • Size of capacity changes• Handling excess demand• Hiring/firing workers• Need for new facilities

FACILITIESFACILITIESFACILITIESFACILITIES

• Best size for facility• Large or small facilities• Facility focus• Facility location

HUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCESHUMAN RESOURCES

• Skill levels required• Degree of autonomy• Policies• Profit sharing• Individual or team work• Type of supervision • Levels of management• Training

QUALITYQUALITYQUALITYQUALITY

• Target level• Measurement• Employee involvement• Training• Systems needed to ensure quality• Maintaining quality awareness• Evaluating quality efforts• Determining customer perceptions

SOURCINGSOURCINGSOURCINGSOURCING

• Degree of vertical integration• Supplier selection• Supplier relationship• Supplier quality• Supplier cooperation

OPERATIONS PRIORITIESOPERATIONS PRIORITIESOPERATIONS PRIORITIESOPERATIONS PRIORITIES

• Cost• Quality• Delivery Flexibility• Delivery Speed• Delivery Reliability• Coping with Changes in Demand• Flexibility and New Product

Introduction Speed

The TRANSFORMATION PROCESSThe TRANSFORMATION PROCESSThe TRANSFORMATION PROCESSThe TRANSFORMATION PROCESS

External Environment

Customer or client participation

Inputs Workers Managers Equipment Facilities Materials Services Land Energy

Operations and transformations

1 3 5 2 4

Information on performance

Outputs Goods Services

MANAGEMENT IN e-BUSINESSMANAGEMENT IN e-BUSINESSMANAGEMENT IN e-BUSINESSMANAGEMENT IN e-BUSINESS

TYPES OF B2B TRANSACTIONSTYPES OF B2B TRANSACTIONSTYPES OF B2B TRANSACTIONSTYPES OF B2B TRANSACTIONS

GLOBALIZED THE BUSINESSGLOBALIZED THE BUSINESSGLOBALIZED THE BUSINESSGLOBALIZED THE BUSINESS

COMPETITIONCOMPETITIONCOMPETITIONCOMPETITION

STRATEGIC DECISIONS IN OPERATIONSSTRATEGIC DECISIONS IN OPERATIONSSTRATEGIC DECISIONS IN OPERATIONSSTRATEGIC DECISIONS IN OPERATIONS

Example : WAL-MARTExample : WAL-MARTExample : WAL-MARTExample : WAL-MART

Product Vs. Process Vs. TechnologyProduct Vs. Process Vs. TechnologyProduct Vs. Process Vs. TechnologyProduct Vs. Process Vs. Technology

MatrixMatrixMatrixMatrix

ISSUES and TRENDSISSUES and TRENDSISSUES and TRENDSISSUES and TRENDS

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