Chapter 2 - Production and R&D Functions PDF

**Chapter 2** **Production and R&D functions** ***What is the production function?*** --------------------------------------- Input -\> Production process + Output --------------------------------------- **Production function =** activity consisting in turning flows of materials and inform...

**Chapter 2** **Production and R&D functions** ***What is the production function?*** --------------------------------------- Input -\> Production process + Output --------------------------------------- **Production function =** activity consisting in turning flows of materials and information into finished goods through the combination of production factors. **Mission =** creating products or services with the purpose of marketing them. **Industrial aspect** / **Service**s are different, but both can be associated with **production.** ***Why focus on the Production function?*** - **Current evolution**, still facing difficulties, current context of economic crisis. How to save the resources and make sure that they are going to be more efficient. New changes in term of repairability for customers taking a look at it. Ex: smartphone - **Competitive intensity =\>** Innovation, competition is global and intense, need to innovate for surviving. Ex: 3D printers who are building houses can be developed. - **Importance of R & D**: theses research needs to be efficient to survive to the competitive aspects of the production function. Ex: France budget in terms of R & D investments? -\> 20/25 billions while Amazon is spending more in less time just to be sure that they stay leaders and continue developing their competitive advantages. **Section 1: the organization of the Production function** 1. **[The organization of the production function: Modes ]** **4 goals** - **Volume:** how many pieces to manufacture? = trying to avoid and limit the inventories, it led the company to think of the demand - **Quality:** how to manufacture? With whom? By whom? With what? = positioning in the market - **Time:** when to manufacture? Where to manufacture? = externalization of the production. You have to take care of the delivery time... **Ex:** Asian countries delay, production of new jerseys by Nike after the won of France at the world cup of football. - **Cost:** what levels of costs? With what? With whom? Where and how? - Pretty difficult to combine those goals. ***2 main focuses:*** - **Optimized production** ("lean production" first been implemented by Chinese company like Toyota): - Reducing delays, troubles/defects/issues, inventory/stock... - Product Standardization: economies of scales **Ex:** Ford company, Taylor 1rst to implement the scientific production, trying to focus on quality and control all the step of production and increase new development - **Reduction of cycles:** design, manufacturing, distribution: reduce procurement time for the customer. **Ex:** Babolat: French organization, tennis brand, partner of Nadal. Became partner with Michelin. They diversify the range of products; they keep their first technic for the strings for the rackets. They ask for Asian partners to produce the other products for them = strategic. But at least they faced other issues coming from customers: Decathlon, Intersport. Because of the need of rapidity to deliver their products to those big companies, they've decided to still produce in Asia but created some stocks in France in order to satisfy such a need of the customers. 2. **[Types of production systems ]** **Production system** = set of interrelated elements (= materials, equipment's, operations...) that are necessary for production. - Organization and control of interactions between various elements in order to achieve a goal deal with **producing.** **External analysis** = classification of enterprises **Internal analysis** = classification of production's organizational methods. Typology of organizations depending on their production systems *2.1) Classification according to the technical process* Classification depending on: - The technical process: fragmented production, continuous production. **Fragmented production** **Continuous production** ------------------------------ --------------------------------------------- Succession of several stages Overall and complete stage Process can be interrupted Process cannot be interrupted (indivisible) *2.2) Classification according to the quantity produced* - The quality produced: small series or large series. +-----------------------------------+-----------------------------------+ | **Production in small series** | **Production in large series** | +===================================+===================================+ | Direct delivery -- no stock | Standardization | | | | | | Ex: coca cola | +-----------------------------------+-----------------------------------+ *2.3) classification according to customer relationship* - Customer relationship: stock production or build to order. +-----------------------------------+-----------------------------------+ | **Stock production** | **Build to order** | +===================================+===================================+ | Depending on demand forecasts | Production only starts if demand | | | exists. Like a bill to order | | Ex: Ferrero | process. Any kind of stocks. | | | | | | Ex: Ferrari, Rolls Royce | +-----------------------------------+-----------------------------------+ *2.4) Classification according to technologies implemented* **Technique** = know-how/methods that allow transformation through a combination of elements. **Technology** = scientific and technical knowledge required in order to handle a process of transformation. Production -\> choice among several technologies. Technology, choice between several techniques. *2.5) Classification according to the service delivery system* **Service** = intangible and non-storable, cannot be touch - Production of services = "Servuction" **"Servuction"** = set of operations constitutive if the process for creating services: - Front office: direct contact with customers (ex: waiter student job at McDonalds) - Back office: no direct interactions/interface with customers Customer participation in production: they can be part of the production system. Good opportunity to company to cut the costs. ***Ex:*** Airbnb, 1rst significant actor in the field of tourism, they actually own 0 places. They are just making the connection between the one who had a need and the one who can propose a solution. 3. **[The organization of production ]** *3.1) Traditional organization* **Technical management** -------------- ------------- --------------------------- ---------------- ----------------------------- -------------- **Research** **Methods** **Scheduling/sequencing** **Monitoring** **Manufacturing workshops** **Delivery** -------------- ------------- --------------------------- ---------------- ----------------------------- -------------- **Functional services Operational services** - Bringing design/manufacturing/distribution cycles together *3.2) Modern organization* ------------------------ *Technical management* ------------------------ ----------------------- Production management ----------------------- -------------------- *Research methods* -------------------- **Section 2: The management of production** 1. **[Definition of production management ]** **Production management** = ensuring operationally the combination of production factors in order to achieve the objectives (Quality, Time, Cost and Volume) of the production function. How to manage priorities... - Managing priorities - Managing capacities 2. **[The monitoring of production system ]** *2.1) historical challenges* - Trades of between planning and adapting Development of technologies and Pressure from international companies -\> give production and sale, volume, quality and time -\> anticipating = planning; adaptation = just-in-time production. *2.2) the Medium-Term planning* **Strategy 1: "Push strategy" =** try to plan and anticipate the forecast related to the customer. The monitoring of production is done UPSTREAM. Upstream monitoring of production = "push" strategy Demand forecast -\> Working planning -\> Manufacturing *2.3) Adaptation* **Strategy 2: "Pull" strategy** = monitoring of production done DOWNSTREAM. 4 objectives of production management (volume, quality, cost and time) - **Just-in-time production**/manufacturing Objectives: - Meet demand when it occurs. - In the right quantity demanded - In the right quality required "Without delays or stocks", downstream-driven production = "Pull" strategy. Interesting as long as it permits the development of a just-in-time manufacturing. **The 5 zeros of JIT:** focusing on savings, at the end the cost of production will be extremely reduced. Hard to implement. Focus on quality. - Waiting for the demand to immerge - 0 stocks - 0 paper (democracy, authorization, certification...) - 0 breakdown - 0 defect - 0 delay **E.g.: DELL** Why did it work? - Reliability of response timer - Product and machinery reliability - Reduced production series - Adaptability of man and machine - Rapid change in the types of production - System of information flow adapted for triggering production asap. 3. **[The control of production management ]** *3.1) Quality management* **[From acceptable to total quality]** **Quality of a product =** - Capacity to meet user's needs -\> Commercial view. - Capacity to meet technical constraints -\> Production view. - Aim of overall controls = selling products at a reduced cost. How to improve quality in production? 3 main axes: - **Technique:** zero defect, focusing on the production system - **Human:** HRM and CRM, enhance the participation of individuals, focusing on management aspect. - **Organization:** simplify and improve the organization of workstations. Participative organization been developed to increase the creativity in the field. *3.1) the overall approach of production control* **7M model opportunity to implement a sort of total quality management in order to achieve certain objective.** - **Man:** management - **Machine** - **Material:** trying to improve the R&D inside the company, development of new materials... - **Money:** how to save money through different ways of implementation. - **Method:** how to include a new method of management within the organization and be able to supervise it. - **Measurement** - **Marketing:** how quality is perceived from the customer views. **Section 3: R&D function and management of the innovation process** 1. **[Areas of research ]** Fundamental research "Discovery" Applied research "Invention" Research-development "Innovation" Invention: is effective when the industrial Organization are looking for: Depend of the source of motivation and destination Developing the knowledges New form of adaptation Innovation is the key [What purpose? ] - **Differentiation:** new product, or product different from competitors. To need to be cheaper then the other but can have a better quality who will lead people to still spend in your product because of it. **Ex:** Apple with IOS, iTunes, cameras - **Cost-leadership:** reduced costs for reducing prices. Paying and investing a lot of money in order to upgrade your materials and reduce your cost of production. It will lead you to be efficient in your savings, economy of scale, standardization, being more effective in the production. 2. **[Innovation Management (reminder)]** **5 types of innovation (Schumpeter, 1935)** - **New product for better satisfying existing needs**: try to complete needs of consumer by adding something more. - **New product for new need** : just likes the smartphone emerged - **Improve product quality:** changing the recipe of your traditional product. - **Conquer markets:** deciding to become international. - **New production method:** for instance, with the JIT method production.