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Session 2
Manufacturing Strategy and Competitiveness
OBJECTIVES
Manufacturing Strategy
Competitive Dimensions
Strategy Design Process A Framework for Manufacturing Strategy Order Qualifiers and Winners
Strategy
Strategy is defined as the determination of basic long term goals and the objectives of the enterprise and the adoption of courses of action and allocation of resources to meet these goals and objectives.
Hierarchy of strategies
The strategy can be for three major levels. Corporate Strategy what set of businesses should we be in? Business Strategy How we should compete in a given business? Functional Strategy How can this function contribute towards the competitive advantage of the business?
Health of the manufacturing function in a company is at the heart of its success.
Manufacturing Strategy
Example
Expansion More market share
Strategy Level
Corporate strategy
Business Strategy
Increase Org. Size
Manufacturing Strategy
Increase Production Capacity
Policy Decisions on Processes and Infrastructure
Build New Factory
Manufacturing Strategy
Manufacturing objectives are derived from business objectives. Manufacturing policies are developed to address these objectives. Manufacturing objectives cover such aspects as cost, quality, delivery and flexibility. There are trade-offs between them. Trade-off decisions are required in a number of key areas
Key areas
1)
plant and equipment; production planning and control;
2)
3)
labour and staffing; product design / engineering; and
organisation and management.
4)
5)
Components of strategy
Operations Effectiveness,
- in core business processes needed to run the business.
Taking orders, handling returns manufacture and shipping of product, cost associated with doing business initiatives such as quality improvement, process redesign, technology investment have shown short term results.
Customer management,
- relates to better understanding of customer needs and
relationships, e.g.. segmenting customers takes longer to realise.
product innovation
development of new products, markets, takes still
longer to realize for manufacturers.
Dealing with Trade-offs
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality. For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems.
Cost
Flexibility
Quality
Delivery
Strategic issues
Manufacturing
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capacity Production facilities Use of technology Vertical integration Quality Production planning/materials control Organisation Personnel All issues are of concern to Technology management
Current Issues
Low
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Cost Countries (LLCs) - set up manufacturing in geographical areas with a low cost base. Outsourcing - suppliers all over the world can be identified and contracted Mass customization - adopt technologies with increased flexibility and respond quickly and costeffectively to customization demands
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Competitive Dimensions
Cost or Price
Make the Product or Deliver the Service Cheap
Quality
Make a Great Product or Deliver a Great Service
Delivery Speed
Make the Product or Deliver the Service Quickly
Delivery Reliability
Deliver It When Promised
Coping with Changes in Demand
Change Its Volume
Flexibility and New Product Introduction Speed
Change It
Other Product-Specific Criteria
Support It
Manufacturing Strategy
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Strategy Design Process
Strategy Map
Financial Perspective
What it is about!
Improve Shareholder Value
Customer Perspective
Customer Value Proposition
Internal Perspective
Build-Increase-Achieve
Learning and Growth Perspective
A Motivated and Prepared Workforce
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Kaplan and Nortons Generic Strategy Map
In the Kaplan and Nortons Generic Strategy Map, under the Financial Perspective, the Productivity Strategy is generally made up from two components:
1. Improve cost structure: Lower direct and indirect costs 2. Increase asset utilization: Reduce working and fixed capital
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Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Financial Perspective, the Revenue Growth Strategy is generally made up from two components:
1. Build the franchise: Develop new sources of revenue 2. Increase customer value: Work with existing customers to expand relationships with company
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Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace:
1. Product leadership 2. Customer intimacy 3. Operational excellence
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Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning:
1. Strategic competencies 2. Strategic technologies 3. Climate for action
Operations Strategy Framework
Customer Needs
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New product : Old product
Competitive dimensions & requirements
Quality, Dependability, Speed, Flexibility, and Price
Enterprise capabilities Operations and Supplier Capabilities Operations & Supplier capabilities
R&D R&D
Technology
Systems Technology Systems
Support Platforms
People People
Distribution Distribution
Financial management
Human resource management
Information management
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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 winners are the criteria that differentiates the products and services of one firm from another
Order
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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 winners are the criteria that differentiates the products and services of one firm from another
Order
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Steps in Developing a Manufacturing Strategy
1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements
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Question Bowl
An operations strategy is concerned with which of the following? a. Setting specific policies and plans b. Short-term competitive strategies c. Coordination of operational goals d. All of the above e. None of the above Answer: c. Coordination of operational goals
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Question Bowl
Typically a strategy breaks down into what major components? a. Operations effectiveness b. Customer management c. Production innovation d. All of the above e. None of the above Answer: d. All of the above
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Question Bowl
A criterion that differentiates the products and services of one firm from another can be which of the following? a. An order qualifier b. An order winner c. PWP d. KPI e. None of the above
Answer: b. An order winner
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Question Bowl
A travel agency processed 240 customers on Day 1 with a staff of 12, and 360 customers the on Day 2 with a staff of 15. What can be said about the productivity shift from Day 1 to Day 2? An increase in productivity from Day 1 to Day 2 A decrease in productivity from Day 1 to Day 2 The same productivity from Day 1 to Day 2 Can not be computed from data above None of the above Answer: a. An increase in productivity from Day 1 to Day 2(Day 1 productivity = 240/12=20 Day 2 productivity = 360/15=24)
a. b.
c.
d. e.
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Question Bowl
In addition to traditional financial measures, what critical questions can a Balanced Scorecard help a company answer? a. How do customers see us? b. What must we excel at? c. How can we continue to improve and create value? d. All of the above e. None of the above
Answer: d. All of the above
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Service
Strategy Capacity Capabilities Measures
Productivity
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Service Strategy Capacity Capabilities
Process-based
Capacities that transforms material or information and provide advantages on dimensions of cost and quality
Systems-based
Capacities that are broad-based involving the entire operating system and provide advantages of short lead times and customize on demand
Capacities that are difficult to replicate and provide abilities to master new technologies
Organization-based
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What is Productivity?
Defined
Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs
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Total Measure Productivity
Total Measure Productivity = Outputs Inputs
or
= Goods and services produced All resources used
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Partial Measure Productivity
Partial
measures of productivity =
Output or Output or Output or Output
Labor Capital Materials Energy
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Multifactor Measure Productivity
Multifactor measures of productivity =
Output
Labor + Capital
or
.
+ Energy
Output
Labor + Capital +
.
Materials
Example of Productivity Measurement
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You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure. Is productivity increasing or decreasing? Answer: Last weeks productivity = 480/2000 = 0.24, and this weeks productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.
