Manufacturing

Excellence
Naga Vamsi Krishna Jasti
BITS Pilani Asst.Professor
Hyderabad Campus Mechanical Engineering Department
 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
BUSINESS B
STRATEGY
`
Vertical Coordination

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.
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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
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– 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
39 © Wiley 2010 BITS Pilani, Hyderabad Campus
 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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