DM202 Manufacturing Strategy PDF

Manufacturing Management DM202 Semester 2 ‘ Manufacturing Strategy’ Colin Andrews: [email protected] Week 9 manufacturing Strategy  Introduction  Strategy Overview  Market Approach to Strategy  Manufacturing’s Response  Decoupling Point  Competing through strategy  Summary Manufact...

Manufacturing Management DM202 Semester 2 ‘ Manufacturing Strategy’ Colin Andrews: [email protected] Week 9 manufacturing Strategy  Introduction  Strategy Overview  Market Approach to Strategy  Manufacturing’s Response  Decoupling Point  Competing through strategy  Summary Manufacturing Strategy Manufacturing Strategy  Make v Buy decisions  How much of my product do I make? (e.g. mobile phones / cars / clothes / aircraft)  Can be an economic decision (break even point, investment return)  Can be a strategic decision (control ‘know how’ etc.)  Manufacturing goals  Responsiveness  Lowest cost producer  Flexibility  Dependability  Innovation Business Strategy - ‘Simple’ Plan Market Position Attract & Please Customers Conduct Operations Compete Successfully Achieve Business Objectives 5 Forces of Competition Internal Competition Threat Of New Competitors Threat of New Technology Bargaining Power of CustomersBargaining Power of Suppliers Competitive Strategy Competitive Strategy Lowest Cost Niche Differentiate ME Porter: 3 Generic Strategies Market Approach to Strategy Markets Dynamics  Market Stability (steady growth, rapid growth, fluctuating, static, decline)  Market Share (minimal, low, moderate, high)  Product Range (narrow, broad)  Product Characteristics (light, fast, durable etc.)  Customer Characteristics (early adopter, cautious, value focus etc.) Product matrix (the Boston Box) Market Growth Market ShareLowHigh High Low Product Matrix  Problem Child:  Low share in a high growth market  Require finance and don’t bring returns  Could be future stars (could be failed stars)  Dogs:  Low share in a low growth market  Require finance and don’t generate cash  Need to divest such products Product Matrix  Rising Stars:  High share in a high growth market  Require finance but bring great returns  The future cash cows  Cash Cow:  High share in a low growth market  Require little finance and generate lots of cash  Will decline over time How Marketeers address the challenge The ‘Marketing Mix’  4 Ps for marketing  Each ‘P’ covers an aspect of the market facing activity that must be addressed  Each ‘P’ must be coordinated with the others  e.g. when entering new market  Limited product variation with clear differentiation  Penetration pricing  Direct sales  Targeted communicationMarketing Mix Manufacturing’s Response Product matrix – Manufacturing Choices Market Growth Market ShareLowHigh High LowCapacity? Quality Level?Capability? Manufacturing’s Challenges  Fragmented manufacturing facilities  Mass customisation  Shortened product life cycles  Customer empowerment  ‘ Zero Defect’ quality How the Operations Fit Together  Remember the SCOR model introduced in week 2 How the Operations Fit Together Get order Develop Product Fulfil Order Support ProductM a na ge F in an ce S u pp ort P e rson n el M a nage Tech no lo g y C o rpo rate Le arn in g D irect B u sin ess F o rm ulate S tra teg ies S e t D ire ction ‘ Support’ Processes‘ Manage’ Processes ‘ Operate’ Processes Linking ‘Operate’ Processes Purchasing Goods Inward Raw Materials Store Production Test, Inspect, Pack Finished Goods Store Dispatch DecisionsActivity Where are materials kept (centrally / offsite / lineside)?Do incoming goods need to be inspected? How is the equipment to be positioned? Is testing 100%, sample or nil? Where are goods kept (locally, customer lineside etc)? Who does this – in house or third party logistics?What triggers placing a purchase order, and with whom? Manufacturing Mix  Cost  Quality  Speed  Dependability (Reliability)  Flexibility  Innovation The business has to make informed choices about how important each element is. Quality, cost and speed can be increased together (Toyota) but this impacts flexibility. Innovation & dependability also need to be balanced. Classification of Companies Raw materials Components Sub- assemblies Finished goodsS u pp liers C u stom e rs Make To Stock (MTS) Assemble To Order (ATO) Make To Order (MTO) Engineer To Order (ETO) Stock held at this stage Produce to forecast Produce to forecast Produce to forecast Produce to order Produce to forecast Differentiators vs. Capabilities From SAP White Paper Complexity vs. volume Manufacturing Analysis Manufacturing Architectures De-coupling Point Key concept: Postponement & the de-coupling point Leadtime De-coupling Point Customers LeadtimePostponement Key concept: The de-coupling point Lean Agile  Forecast driven  Economic batch quantities  Maximise efficiencies  Demand driven  Localised Configuration  Maximise effectiveness Strategic Inventory De-couple the supply chain Driven By Demand Driven ByDriven By Forecast o Where the forecast meets demand o Point at which strategic inventory is held o No need to hold inventory all along the supply chain Logistical Postponement: Delay committing products to particular market segments or customers as long as possible, preferably until firm orders have been received.; Hold stock back in a central location and distribute only when demand is known. Form postponement: Forecast at a generic level (its easier!) and delay final product configuration until firm orders have been receivedKey concept: Postpone as much as possible TASK: Find an example of a company that has introduced postponement. What did they postpone? What have been the benefits? READ: Articles available on VISION and relevant chapters in text Case: Dell Computers • 1983 – Michael Dell, a medical student, buys out-dated IBM PCs and upgrades them to sell at bargain prices • 1987 – Dell Computers build own PCs and sell direct to customers DELL Competitor X Customer -focused Product-focused Assemble-to-order Make-to-forecast JIT-based manufacturing Traditional approach Direct to customers, on-line sales Sell through traditional channels 11 days total inventory Several months inventory Lean & flexible (agile) Slow to respond Low risk of obsolescence High risk of obsolescence Time is the key Competing Through Strategy Competing through Strategy  High visibility of strategy internally and externally (if appropriate)  Good performance though having a shared vision  Bland statements of intent do not help  Good strategy is delivered through good infrastructure and excellent processes Strategic choices in Manufacturing  Strategy often shows the ‘why’ and the ‘what’, there are still a number of choices of ‘how’  These can support the intent of strategy  Or degrade it (too inflexible, too costly, etc.)  Operations and Marketing have large areas of overlap  Marketing must understand the capability they are ‘selling’  Operations must develop the capability to meet ‘customer need’  Can have a link between the business strategy and manufacturing strategic actions  Business: Need to enter Asian markets  Manufacturing: Need to develop assembly processes in Vietnam ‘ Best Practice’ impact of Manufacturing  Firms utilising generally recognised ‘Best practice’ (e.g. Lean, Six Sigma) are shown to perform better  Application of ‘Best Practice’ must be thought through to fully benefit the firm  Techniques must help the business achieve its strategic goals Manufacturing Strategic Approaches Competing thru’ Manufacturing Strategic Choices in manufacturing Best practice Key Concepts Order winners Key Success factors Capability Generic strategies Shared Vision Contingency approaches Internal and external consistency Choice of process Process and infrastructure Focus World Class Manufacturing Benchmarking Business Process Re- engineering Lean Six Sigma Continuous Improvement Process Measurement Manufacturing Strategy IS ITERATIVE Competing through Manufacturing Best PracticeChoices in manufacturing Summary  Different companies need different approaches  Some companies are at the leading edge of capabilities  Others are not (and may not need to be – excel at one thing)  Influencing factors (market conditions, manufacturing system, product) interact in complex ways  Factors need to be UNDERSTOOD  Manufacturing needs to;  Integrate with business strategy  Find the balance point with other functions (marketing)  Adapt in a changing environment  Understand where the business fits to the changing landscape