Manufacturing Excellence

BITS Pilani Naga Vamsi Krishna Jasti Asst.Professor

Mechanical Engineering Department
Hyderabad Campus
 BITS Pilani
Hyderabad Campus

Manufacturing Strategy
 Contents
 Manufacturing and Strategy
 Definitions of Manufacturing Strategy
 Role and importance of Manufacturing Strategy
 Developing business strategy
 Developing manufacturing strategy
 Order Qualifiers and Winners
 Manufacturing Strategy: Lead times
 Competitive Priorities- The Edge
 Production Requirements
 Technology for Competitive Advantage
 Case Study

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 Typical Views of Manufacturing
In some companies, many managers believe that
there is no such thing as a Manufacturing Strategy.
The quotes on the next slide illustrate the belief that
Manufacturing exists to do whatever it takes to
satisfy R&D and Marketing/Sales.

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Typical Views of Manufacturing
 “R&D designs the product, Marketing/Sales sells the product, and
then Manufacturing produces what it’s told when it’s told.”
 “Manufacturing is supposed to make up R&D delays and change
orders and meet whatever promises are made by Marketing/Sales.”
 “In our top management meetings, R&D and Marketing/Sales
dominate the discussion and, at the end of the meeting,
Manufacturing is told what to do.”
 “Everything is going well in Manufacturing when you don’t hear
any complaints about it.”

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 Typical Views of Manufacturing
In this session, my goals are:
– To convince you that the quotes on the previous slide are
wrong and that there is such a thing as a Manufacturing
Strategy.
– To provide you with a broad framework for thinking
about a Manufacturing Strategy.
During the remainder of our sessions, we will see both
good and bad elements of a Manufacturing Strategy.

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 Definition of Strategy
 Webster’s Dictionary defines “strategy” as follows:
– “… the science and art of military command used to meet the
enemy in battle under advantageous conditions.”
business management
--“… the science and art of ^ military command
competitor in competition
used to meet the ^ enemy in combat under advantageous
conditions.”

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 Strategy : Simplification
Device for
–Disciplined planning & thinking
–Communication
–Organization building

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 Manufacturing Strategy: Definitions
 It is exploiting certain properties of the manufacturing function as a
competitive weapon (Skinner, 1969).
 Hayes and Wheelwright (1985)have defined it is a consistent pattern of
decision making in the manufacturing function which is linked to
business strategy.
 MS as a tool for effective use of manufacturing strength as a
competitive weapon for achievement of business and corporate goals
(Swamidass and Newell, 1987).
 A collective pattern of decision that acts upon that formulation and
deployment of manufacturing resources. To be most effective, it should
act in support of the strategic directions of the business and provide for
competitive advantages (Cox and Blackstone, 1998)

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Skinner on Manufacturing Strategy(1969)

 different companies within the same industry have different

strengths and weaknesses and choose to compete in different
ways
 different production "systems" have different operating
characteristics and each involves a different set of trade-offs
 a production system must have a customized design that
reflects the priorities and trade-offs inherent in the firm’s own
competitive situation and strategy

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 Skinner on Manufacturing Strategy
Therefore, no one operating system is universally superior
under all competitive situations and for all companies.
Every operating system embodies a set of trade-offs.
Some will be particularly good at producing standardized
products in high volume at low cost;
others will excel at responding quickly to shifting demand
for more customized products.

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 Role of Manufacturing Strategy
Provide a plan that makes best use of resources
which;
–Specifies the policies and plans for using
organizational resources
–Supports Business Strategy

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 Importance of MS
Companies often do not understand the differences
between operational efficiency and strategy
– Operational efficiency is performing tasks well, even
better than competitors
– Strategy is a plan for competing in the marketplace
Operations strategy is to ensure all tasks performed are
the right tasks

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 Developing a Business Strategy
A business strategy is developed after taking into many
factors and following some strategic decisions such as;
– What business is the company in (mission)
– Analyzing and understanding the market
(environmental scanning)
– Identifying the companies strengths (core
competencies)

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 Three Inputs to a Business Strategy

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 Three Inputs to a Business Strategy
Mission
Relating the Organization’s Efforts to its Long Term Future.
– What Business are we in?
– Who are Our Customers?
– What are our Concepts and Beliefs?
– How Do We Measure Performance
–Growth?
–Profits?
–Market Share?
–Innovation?

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 Three Inputs to a Business Strategy
Environment:
Scanning the Environment for Opportunities and Threats:
• Competition
• Market
• Economic Trends
• Social and Political Changes

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 Three Inputs to a Business Strategy
Distinct Competencies
Organization’s Unique Strengths-- those that are difficult
for others to duplicate
Examples:
Competent Workforce
Advantageous Location
Innovative Capability
Technology
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 Examples from Strategies
Mission: Dell Computer- “to be the most successful
computer company in the world”
Environmental Scanning: political trends, social
trends, economic trends, market place trends, global
trends
Core Competencies: strength of workers, modern
facilities, market understanding, best technologies,
financial know-how, logistics

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 Business Strategy
Vertical Coordination

BUSINESS B
STRATEGY
`

ACCTING &
R&D MFG MKT & SALES
FINANCIAL
STRATEGY STRATEGY STRATEGY
STRATEGY

Horizontal Coordination

Vertical Coordination. Management of the Business Unit must clearly communicate the
business strategy to the managers of Functional Areas.

Horizontal Coordination. Through a specific and consistent pattern of decisions, all

functional strategies must support the competitive priorities of the business strategy.

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 A “Nightmare” of Functional Strategies
 Management of the Business Unit never communicates the business
strategy to the managers of the Functional Areas and is ignorant of the
fact that
 R&D thinks that the competitive priority is Flexibility and thinks that it
can demand as many change orders as it wants.
 Manufacturing thinks that the competitive priority is Cost and bases
all its decisions on what is the cheapest thing to do.
 Marketing/Sales thinks that the competitive priority is Dependability
and feels it can promise delivery as soon as a customer wants its.

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 Manufacturing Strategy

ACCTING &
R&D MFG MKT & SALES
FINANCIAL
STRATEGY STRATEGY STRATEGY
STRATEGY

VERTICAL
CAPACITY FACILITIES TECHNOLOGY
INTEGRATION
Amount Size Equipment Direction
Timing (lead/lag) Location Automation Extent
Type Specialization

PRODUCTION &
QUALITY INVENTORY ORGANIZATION WORK FORCE
PLANNING
Methods Sourcing Structure Skill Levels
Metrics Decision Rules Control Wages
Distribution Reward Training

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 Manufacturing Strategy
 The purpose of the Manufacturing Strategy is to:
– Support the Business Strategy.
– Complement the other Functional Strategies
 For example, in many companies, there is frequently a tension
between R&D and Manufacturing.
 R&D views itself as a collection of creative people with the role
of designing the most innovative product possible, even if it
means submitting to Manufacturing a continual stream of
change-orders.
 On the other hand, Manufacturing views itself as a collection of
practical people with the role of minimizing the manufacturing
cost per unit.
 Who is right – R&D or Manufacturing?
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 Developing an Operations Strategy
Operations Strategy is a plan for the design and
management of operations functions.

Operation Strategy developed after the business

strategy.

Operations Strategy focuses on specific capabilities

which give it a competitive edge – competitive
priorities
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Operations Strategy – Designing the Operations
Function

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 Order Qualifiers and Winners Defined

Order qualifiers are the basic criteria that permit

the firms products to be considered as candidates for
purchase by customers

Order winners are the criteria that differentiates the

products and services of one firm from another

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 Service Breakthroughs

A brand name car can be an

“order qualifier”

Repair services can be “order winners”

Examples: Warranty, Roadside Assistance, Leases,
etc.
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Manufacturing strategy based on lead time

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Engineer-to-Order

Manufacturer does not start until the order is received

Custom designs
Unique products

Long lead time

Inventory purchased after order is received

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Make-to-Order

Manufacturer does not start until the order is received

Often uses standard components
Little design time

Lead time is reduced

Inventory held as raw materials

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Assemble-to-Order

Manufacturer inventories standard components

No design time required
Assembly only required

Shorter lead time

Inventory held as standard components

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Make-to-Stock

Manufacturer produces the goods in anticipation of

customer demand
Little customer involvement with design

Shortest lead time

Inventory held as finished goods

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 Competitive Priorities- The Edge
Four Important Operations Questions: Will you compete
on –
Cost?
Quality?
Time?
Flexibility?
All of the above? Some? Tradeoffs?

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 Competing on Cost?
 Offering product at a low price relative to competition
– Typically high volume products
– Often limit product range & offer little customization
– May invest in automation to reduce unit costs
– Can use lower skill labor
– Probably use product focused layouts
– Low cost does not mean low quality

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 Competing on Quality?
 Quality is often subjective
 Quality is defined differently depending on who is defining it
 Two major quality dimensions include
– High performance design:
• Superior features, high durability, & excellent customer service
– Product & service consistency:
• Meets design specifications
• Close tolerances
• Error free delivery
 Quality needs to address
– Product design quality – product/service meets requirements
– Process quality – error free products

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 Competing on Time?
 Time/speed one of most important competition priorities
 First that can deliver often wins the race
 Time related issues involve
– Rapid delivery:
• Focused on shorter time between order placement and delivery
– On-time delivery:
• Deliver product exactly when needed every time

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 Competing on Flexibility?
 Company environment changes rapidly
 Company must accommodate change by being flexible
– Product flexibility:
• Easily switch production from one item to another
• Easily customize product/service to meet specific requirements
of a customer
– Volume flexibility:
• Ability to ramp production up and down to match market
demands

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 Production Requirements
Specific Operation requirements include two general
categories
– Structure – decisions related to the production process,
such as characteristics of facilities used, selection of
appropriate technology, and the flow of goods and
services
– Infrastructure – decisions related to planning and
control systems of operations

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 Production Requirements
 Dell Computer example – structure & infrastructure
– They focus on customer service, cost, and speed
– ERP system developed to allow customers to order directly
from Dell
– Product design and assembly line allow a “make to order”
strategy – lowers costs, increases turns
– Suppliers ship components to a warehouse within 15 minutes of
the assembly plant - VMI
– Dell set up a shipping arrangement with UPS

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 Strategic Role of Technology
 Technology should support competitive priorities
 Three Applications: product technology, process technology, and
information technology
– Products - Teflon, CD’s, fiber optic cable
– Processes – flexible automation, CAD
– Information Technology – POS, EDI, ERP, B2B

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 Technology for Competitive Advantage
Technology has positive and negative potentials
– Positive
• Improve processes
• Maintain up-to-date standards
• Obtain competitive advantage
– Negative
• Costly
• Promotes dependency
• Risks such as overstating benefits
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Technology for Competitive Advantage
Technology should
–Support competitive priorities
–Can require change to strategic plans
–Can require change to operations strategy

Technology is an important strategic decision

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 Case Study: Automotive Industry
Company A is a india’s one of the oldest two wheeler
automobile manufacturing company (established in
1945).
The company produces 9 models two wheelers and 3
models three wheelers.
It has 11,000 employees and 40% of market share in
wheeler segment.
It has 15% exports of total sales.

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 Case Study: Previous Approach
 The period of 1950 -1980, an era of limited supply with Govt’s
restrictive and regulative industrial policy, company production was
very less than demand.
 The company enjoyed monopoly market status in that period.
 During that period, the company did not have a marketing
department. Therefore, it had no specific strategy till 1980s.
 After economic liberalization, many new companies entered in this
sector with Japanese collaboration.
 In 1980’s the company grew explosively and its production volume
increased from 172 to 800 thousand units a year.

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 Case Study: Present approach
 Due to increased competition in Indian market, the company
created a marketing department in 1993.
 It has focused on increasing annual sales to 1 million units.
 The company decided to modernize plants and increased
production efficiency.
 The company has invested in advanced manufacturing technology
such as CAD, CAM, CNC machines etc and framed a marketing
strategy.

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Case Study: Elements of Marketing Strategy
 Following formed the important elements of marketing strategy:
– Increased dealer network
– Dealers allowed to sell only company brand vehicles.
– Periodically introducing new product
– 50% of the components to be produced by vendors.
– Deploying 50 service engineers at dealership to upgrade the technical
skills of dealer service personnel.
– To start its own financial company to finance the vehicles.
– Sell the product at a competitive price.
– Increase in investment in advertising and describe additional features.

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 Elements of Manufacturing Strategy
 Essential features of its manufacturing strategy are:
 Speed up the new product development by using AMT like CAD
and CAM.
 Mission of manufacturing is continuous improvement with zero
defects.
 Quality circles to be established to get suggestions for
improvement at shop floor.
 Matching competitor product features by constantly improving the
existing product.
 Information Technology such as ERP.
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 Summary

 Manufacturing and Strategy

 Definitions of Manufacturing Strategy
 Role and importance of Manufacturing Strategy
 Developing business strategy
 Developing manufacturing strategy
 Order Qualifiers and Winners
 Manufacturing Strategy: Lead times
 Competitive Priorities- The Edge
 Translating to Production Requirements
 Technology for Competitive Advantage
 Case Study
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 Thank You
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