Manufacturing Strategy

Lecture 1

Professor Bernard Hon School of Engineering

The Lecture Programme

A series of 20 hours lectures on :

Review of manufacturing Competitive strategies Product & manufacturing analysis Formulation of manufacturing strategy Benchmarking Global manufacturing.

Assessment

Module specifications published in VITAL. Assessment by examination only. One 2 hour paper, answer 3 out of 5 questions.

Outline of Lecture 1

The nature and importance of manufacturing. Common problems of manufacturing industry. Opportunities and threats in manufacturing. Global manufacturing issues. Vital topics in manufacturing.

What is Manufacturing?

The use of machines, systems and human resources to transform raw materials and supply chain inputs into a value-added saleable product.

What is Manufacturing today?

Providers of lifetime service around a manufactured product. A blurring of the distinction between manufacture and services, leading to multiple revenue streams streams, an emphasis away from the initial sales revenue to lifetime revenue.

Implications of Extended Definition

To lock out competitors To lock in customers To increase the level of differentiation.

Vandermerwe and Rada, 1988

Living in a Manufacturing World

Alarm a c clock, oc , e electric ec c s shower, o e , towel, o e , tooth oo brush, comb, contact lens, glasses, clothes, watch, trainers, toaster, egg slicer, knife and fork, coffee cup, cordless kettle, radio, TV, remote control, purse, credit cards, ca ds, co coins, s, mobile ob e p phone, o e, bag, holdall, o da , backpack, bus, car, train, lift, computer, digital projector, screen, cable, 13 amp plug, light bulb, pen, notebook.

SIC Codes for Manufacturing

Importance of Manufacturing

The UK is the worlds sixth largest manufacturer measured by output. 150 billion per annum to the economy. Contributes 14% of UKs national output (21% in 1997). Accounts for over 50% of UK exports. Direct employment of just under 3 million people, i.e., 11% of all employment. CBI estimated a further 3 million jobs through the supply chain and service industries. Total number of manufacturing enterprises is 158,528 with a combined turnover of 447.2 billion in 2003.

Importance of Manufacturing

Contributes 14% of UKs national output (21% in 1997). Accounts for over 50% of UK exports. Direct employment of just under 3 million people, i.e., 11% of all employment. CBI estimated a further 3 million jobs through the supply chain and service industries. Total number of manufacturing enterprises is 158,528 with a combined turnover of 447.2 billion in 2003.

Contribution of Different Sectors to the Total Manufacturing Value Added in 2003

6145 16565 21855
Food products, beverages and tobacco Textiles and textile products Leather and leather products Wood and wood products Pulp, paper, paper products, publishing printing Coke, refined petroleum products and nuclear fuel Chemicals and products and man-made fibres Rubber and plastic products Non-metallic mineral products

4222 375 2662 15598

18830 11722 2609

Basic metals and fabricated metal products Machinery and equipment not elsewhere classified Electrical and optical equipment Transport equipment Manufacture not elsewhere classified

14782 5340 7667

15188

ESRC

Food & Drink

% GDP

Elect. Eng

Papers & Printing

Chemicals

Mech Eng.

1997

Textiles

Motor Vehicles

Metal Prod.

Minerals

Aerospace

Contribution of Industry to GDP

Size of Manufacturing Sectors

10 15 20 25 30 35 0 5
Ja pa n i na ly Ch I ta Ca Ge da rm an y In d ia F ra nce UK US A HK na

Metal

Others

16 14 12 10 8 6 4 2 0

Company Size in Manufacturing Industry

80 70 60 50 40 30 20 10 0
under 20 20-49 50-99 100-199 200-499 500-999 1000+

Common Problems of Manufacturing Industry

Long o g lead ead t times es for o new e p product oduct introduction t oduct o a and d change Excessive stocks and work-in-progress Low capital turnover ratio, i.e., too much underutilised equipment Too oo much uc non-value-added o a ue added act activities t es in o offices ces a and d shop floors Low productivity due to inadequate planning and low level of investment.

Manufacturing Investment in the UK

Total Mfg Investment B 18 16 14 12 10 8 6 4 2 0
2001 2002 2003 2004

Mfg as a % of total business investment

ESRC

Manufacturing as Percentage of GDP from 1973-2000

OECD, CNS, US BEA

Present/Future Market Characteristics- 1

Shorter product life cycle. Emphasis on new product development. Globalization. Single European currency. Mobility of transnational companies.

Present/Future Market Characteristics- 2

Extensive practice of outsourcing. Agility, flexibility and reconfigurability. Increasing protectionism. Volatile exchange rate for pound sterling. Extended and virtual enterprises. Advanced technology widely available.

VW Beetles 1938-2003

The product life cycle of modern cars, unlike VW Beetles, is about 6-7 year.

Paradigm Shift in Manufacturing

Transfer Line Group Technology FMS JIT Agile Manufacturing Holonic Systems? Factory of the Future?

Opportunities and Threats in Manufacturing

Economic Factors Demography and Lifestyles The Environment

Market Factors

External Threats

Technology

Market, Product and Service Opportunities

External Threats to Manufacturing

The Credit Crunch Financial volatility US deficit effect Rapidly escalating energy cost Fewer supporting technicians More demanding work patterns Greater mobility of workers Public and government pressure Resources depletion Prod ct and process pollution Product poll tion More competition Deregulated public procurement

Economic Factors Demography and Lifestyles The Environment

Market Factors

External Threats

Loss of access Substitution Disruptive technology

Technology

World Competitiveness Scoreboard

WEF

Switzerland Singapore Sweden Finland USA Germany Netherlands Denmark Japan UK

1 2 3 4 5

2 5 4 6 1

Hong Kong SAR

Canada Taiwan Qatar Belgium Norway N Saudi Arabia France Austria Australia

11 12 13 14 15 16 17 18 19 20

11 10 17 26 19 15 27 16 14 18

6 7 7 8 8 3 9 9 10 12

WEF 2008 and 2011

Comparison of Manufacturing Labour Costs

$/hr

25 20 15 10 5 0 GER JPN USA FRA UK SGP SKO HK HUN PRC

The Worlds Top Ten Banks by Profit- 2011

Pre-tax Profit B

ICBC China Construction Bank JP Morgan Chase Bank of China HSBC Wells Fargo Agricultural Bank of China BNP Paribas Banco Santander Goldman Sachs

China Chi China USA China UK USA China France Spain USA

32.528 32 528 26.448 24.859 21.463 19.037 18.700 18 700 18.230 17.406 16.079 12.892
The Banker, July 2011

International Comparison of Robot Usage

Unit ('000) 450 400 350 300 250 200 150 100 50 0 1990 1994 1998 2002
FT 5/10/99
Japan Europe US

Opportunities in Manufacturing
Economic Factors Demography and Lifestyles The Environment
Dynamic Pacific rim Single European Union Globalization Affluent population bulges and ageing Need for Quality of Life product and services Preferences for green products New EOL Directives More open, multi-niche markets High value products and services growth Mass customisation Shorter life cycles Multi-technology products Intensification

Market Factors

Technology

Market, Product and Service Opportunities

EU Member States

European Union
Population, m

Austria 8.3 Belgium 10.5 Bulgaria 77 7.7 Cyprus 0.8 Czech Republic 10.3 Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia 5.4 1.3 5.3 60.9 82.5 11.1 10.1 4.2 58.8 2.3

Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain

3.4 0.5 04 0.4 16.3 38.1 10.6 21.6 5.4 2.0 43.8

Sweden 9.0 United Kingdom 60.4 EU27 491.0

2008

Distribution of World Population

Country size in proportion to Population.

www.worldmapper.org

Distribution of World GDP

Country size in proportion to GDP.

www.worldmapper.org

Recent Studies

Competing with the Worlds Best, CBI, 1991 Can Europe Compete, Financial Times, 1994 Technology Foresight, OST, 1995 Manufacturing 2020, 2001 UK Manufacturing Strategy, 2004 High Value Manufacturing, 2008

Trends in Manufacturing

Global manufacturing and outsourcing. Strong emphasis on supply chain network. Increase focus on service package. Management of change and innovation. Impact of ICT. Knowledge Management Management. New EU End-of-Life and Sustainable Development directives. Miniaturization.

Systems Approach to Manufacturing

Instructions Schedules
Classical Key Performance Indicators

Materials Components Tooling Staff Manufacturing System

Products Waste Scrap Data

Analysis

Production Output Time

Yield

Time

Machines

Test equipment
Cost per unit

Time

Byrne, G, 2009