Manufacturing Strategy Concepts

Manufacturing is Complex WHY ?

Manufacturing is complex because; - large number of employees skilled or unskilled - line or staff or manager - formal and informal system or procedures - good and bad practices - old and new culture coexists

Manufacturing changes slowly as it takes time to: - build facilities - install new equipment - develop new suppliers, - change operating procedures - train personnel
While customer requirements changes quickly.
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Manufacturing Strategy
Business Strategy A companys business strategy is the sum of individual strategies of its component functions i.e. manufacturing, marketing & sales, R&D, finance etc.

Manufacturing Strategy A manufacturing strategy consists of a sequence of decisions that over time enable a business unit to achieve a desired manufacturing structure, infrastructure and set of specific capabilities.

Taxonomy of Manufacturing Strategy

Figure 1: Retrieved from Restoring Our Competitive Edge by R.H. Hayes & S. C. Wheelwright and from 4 Manufacturing Strategic Planning by D. A. Garvin.

Functional Strategies
The third level of strategy is comprised of functional strategies. Once business unit has developed its business strategy, each functional area develop strategies that support this strategy. Usually business has following functional strategies: 1. 2. 3. 4. 5. 6. Marketing & Sales Strategy Manufacturing Strategy Research & Development Strategy Accounting and Financial Strategy Quality Assurance Field Maintenance etc

To be effective, each functional strategy must support the competitive advantage being followed by the business strategy.

Manufacturing Strategy Decision Categories

Structural

Manufacturing Strategy

Infrastructural

Figure 2: Decision Categories of Manufacturing Strategy

Manufacturing Strategy Decision Categories

The first four decision categories in Figure 2 are typically viewed as structural because of their long term impact, the difficulty of reversing once they are in place and large investment required to extend or alter. The last four decision categories in Figure 2 are considered to be infrastructural (tactical) because they encompass multiple ongoing decisions, are linked with specific operating aspects of business and generally do not require high capital investments. These eight decision categories are closely interrelated. For example total annual capacity of the manufacturing facility depends on whether its production rate is maintained at about the same level or changed frequently. Similarly, workforce policies interact with facility and production planning choices.

Manufacturing Strategy Decision Categories

Management make decisions in all these categories. Each of the category provides variety of choices and can have a major impact on manufacturing functions ability to implement and support the organization's business strategy. It is critical that decisions made throughout in the organization at all levels must be consistent with other decisions made at other point in time and within other categories.

Criteria for Evaluating a Manufacturing Strategy

Consistency Between the manufacturing strategy and the overall business strategy (external) Between the manufacturing strategy and the other functional strategies within the business (internal) Among the decision categories that make up the manufacturing strategy Between the manufacturing strategy and the business environment (resources available, governmental restraints etc.) Contribution (to competitive advantage) Making tradeoffs and enabling manufacturing to set priorities that enhance the competitive advantage Promoting clarity regarding the manufacturing strategy throughout the business unit so its potential can be realized Providing the manufacturing capabilities that will be required by the business in the future

Manufacturing Strategy Decision Categories

or vertical integration

Table 1: Manufacturing Strategy Decision Categories

Key Output Parameters (KOPs) in Manufacturing

A customer buys a product or service because of his/her perception of

Cost

Quality
Delivery time Flexibility

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Cost
Initial Cost (purchase cost of an automobile) Operating Cost (gasoline cost per mile) Maintenance Cost (cost of a tune-up)

Product Quality
Product quality directly influences the marketability of a product and customer satisfaction. Product with high quality should provide following characteristics; Performance: The basic operating characteristics of a product; for example, how well a car handles its gas mileage. Features: The "extra" items added to the basic features, such as a stereo CD or a leather interior in a car. Reliability: The probability that a product will operate properly within an expected time frame or the measure of confidence of a consumer towards a particular product. Eg. a Sony TV will work without repair for about seven years. Conformance: The degree to which a product meets pre-established standards. There should be an agreement between the designed and the actual product standard o meet customer specifications. E.g. Descon made pressure vessel fails in few days.

Product Quality
Durability: How long the product lasts; its life span before replacement or a capability of a product to resist wear and tear or decay etc. A Moltifoam, with care, might be expected to last a lifetime. Serviceability: The ease of getting repairs, the speed of repairs, and the courtesy and competence of the repair person. Aesthetics: How a product looks, feels, sounds, smells, or tastes. Safety: Assurance that the customer will not suffer injury or harm from a product; an especially important consideration for automobiles.

QUALITY FROM THE CONSUMERS PERSPECTIVE

Time and timeliness: How long a customer must wait for service. For example, is an overnight package delivered overnight?

Completeness: Is everything the customer asked for provided? For example, is a mail order from a catalog company complete when delivered?
Courtesy: How customers are treated by employees. For example, are phone operators at PTCL nice and are their voices pleasant? Consistency: Is the same level of service provided to each customer each time? Is your newspaper delivered on time every morning?

QUALITY FROM THE CONSUMERS PERSPECTIVE

Accessibility and convenience: How easy it is to obtain the service. For example, when you call KESC does the service representative answer quickly? Accuracy: Is the service performed right every time? Is your bank or credit card statement correct every month? Responsiveness: How well the company reacts to unusual situations, which can happen frequently in a service company. For example, how well a telephone operator at worldcall is able to respond to a customer's questions about a query not fully described in the instructional manual / website.

Delivery
Accuracy/Completeness (correct items in correct quantities) Dependability (on-time delivery) Availability (in-stock) Speed (lead time; i.e., elapsed time from placement of order until its receipt) Information Availability (use Internet for real-time order status) Ease of Ordering (ability to order over Internet, phone) Quality after Shipment (breakage) Ease of Return

Customer Support

Flexibility
Product Flexibility (new features, innovation, and ability to customize)

Volume Flexibility (response to unanticipated demand)

Process Flexibility (adapt process to provide a variety of products)

Output Parameters in Manufacturing

J. Miltenburg (2007) divided manufacturing outputs in six categories, given in Table 2.

Table 2: Manufacturing Outputs

Output Parameters in Manufacturing

Mapes et al (1997) divided manufacturing outputs in seven categories, i.e. cost, quality consistency, quality specification, lead time, delivery reliability, flexibility, and innovativeness. 1. The difference in the number of outputs is due to the lack of generally accepted definitions of these key concepts.

2. The difference in the number of outputs is because of the level of analysis. If the level of analysis is an entire company then a smaller number of broader manufacturing outputs can be appropriate. However, if the level of analysis is a small factory that uses single production system to produce limited products then a slightly larger number of narrowly defined manufacturing outputs is useful for developing strategy.

Output Parameters in Manufacturing

No factory in the world can provide all outputs at the highest possible levels, so it is important which output is important to customers now and which will be important in the future.

Once we know which outputs customers require, then we can select the production system that is best able to provide these outputs

Production Systems
There are seven different production systems possible which are: (J.Miltenburg; 2007)

1. 2. 3. 4. 5. 6. 7.

Job shop Craft production Batch flow Operator-paced line flow Equipment-paced line flow Mass production Continuous flow Lean Just-in-time (JIT) production Flexible manufacturing systems (FMS)

Classification of Production Systems

Production systems can be classified in three ways which are: (J.Miltenburg; 2007) 1. Product mix (number of products produced and production volume of each product) 2. Equipment layout and material flow 3. Manufacturing outputs (delivery, cost, quality, performance, flexibility, innovativeness).

Classification of Production Systems

Figure 3: Classification of Production Systems (J. Miltenburg ;2007)

Classification of Production Systems

Manufacturing systems can be classified into different categories:

Size: Large or SME

Types of Product: Electronics, Chemical, Metal Technology: CNC, FMS, Manual Market: MTS, MTO, CTO and ETO Machine Layout: Fixed position, functional, cellular and flow Material Flow: Job, Batch, Mass

Means of Serving the Market

There are four major ways in which the market can be served: Make to Stock (MTS): In this case, the customer requires product with almost no forward notice. Suppliers usually manufactures in anticipation of demand and maintain stock of finished product. E.g. stationary, cold drinks, lays chips etc Configure to Order (CTO): In this case, customer is prepared to wait for limited period but not long enough for the product to be manufactured from base raw materials. Company usually configures components into saleable products when actual customer order are received. E.g. ordering food in a restaurant Make to Order (MTO): In this case, company does not commit resources until firm customer order have been received. E.g. manufacturing of commercial and fighter airplanes Engineer to Order (ETO): This is similar to MTO except that in this case, the item to be manufactured is defined by the customer. E.g. customised Ferrari or Rolls Royce or private airplane, tailored clothes etc

Machine Layout
There are four fundamentally different ways of arranging equipment within a factory:

Fixed Material: In this case, the equipment moves around a fixed product under manufacture. This is typically employed for large products (e.g. ship building or civil engineering projects). Functional: Similar machines are grouped together. (Job shop)
Group Technology or (Cellular): Machines are arranged to manufacture product families. (e.g. brake lining manufacture). Flow: In this case, the production facilities are designed to manufacture/process specific products in large quantities. (e.g. car production, crude oil processing etc).

Machine Layout
Which is more efficient?

Material Flow Structures

Distinctions can be made in the material flow structure as follows: Project: In a project, the inputs are brought to the project location as they are needed; there is no material flow. e.g. building construction, ship building Job shop (extremely varied flow): A job shop is a flexible operation that has several activities through which material can pass. In a job shop, it is not necessary for all activities to be performed on all products, and their sequence may be different for different products. e.g. machine shop with drill, lathe and milling machine but one product goes on drill and lathe and the other goes on lathe and drill

Batch process (flow varied with patterns) : where groups of items are made together. Each batch is finished before starting the next block of goods. e.g 50 loaves of white bread, after finishing it will start baking 50 loaves of brown bread

Material Flow Structures

Flow process (equipment-paced line flow): where identical items are produced on an assembly line. e.g. cars, canned drinks Continuous flow process: a continuous flow process has a fixed momentum and fixed sequence of activities. Rather than being processed in discrete steps, the product is processed in a continuous flow. e.g. oil refineries and sugar processing industries