15.

769
ManufacturingStrategy
Spring2001
Secondrevisionofsyllabus

Prof.DonRosenfield:E40419,2531064,email:donrose@mit.edu
TeachingAssistant:MelissaFalkowski,OfficeTBD,mfalkow@mit.edu
Manufacturingstrategyexaminesstrategyformanufacturingandoperationswithinthe
firm.Thecoursewillexaminehowmanufacturingandoperationscanbeusedas
competitiveweapons.Traditionally,theseareashavebeenviewedasnarrow,functional
areas,andmanagementofthemwasbasedonsomesimplecriterionsuchascost
minimization.Inrecentyears,managersandbusinessobservershaveunderstoodthat
manufacturingandoperationshavetobemanagedinthebroadercontextofbusiness
strategy.Inthissense,decisionsonmanufacturingcapabilitiesmustfitandbeconsistent
withthebusinessstrategy.Furthermore,decisionsaboutdifferentareasofmanufacturing
mustbeconsistentwitheachother.Choicesaboutfacilities,capacity,vertical
integration,processtechnology,controlandinformationsystems,sourcing,human
resources,organizationandotherareasareallstrategicchoicesthatsignificantlyaffect
whatthebusinessbringstothemarketplace.Thecoursewillexaminehowdecisionsin
theseareascanbemadeinacoherentmanner.Wewillalsoexploreoperationsingeneral
andnotjustinamanufacturingenvironment.
Beyondintegrationofmanufacturingdecisionswithbusinessstrategy,manufacturingand
operationsstrategyemphasizetheconceptofleveragingmanufacturingandoperations.
Usingthebroadnotionofoperations,acompany'sstrengthinmanufacturingor
operationscangainasignificantcompetitiveadvantage.Suchanadvantagecanaccrue
throughsuperiorproductdevelopment,cost,quality,features,etc.
Thecoursewillbedividedintofiveparts.Inthefirstpart,wewillexaminegeneral
conceptssuchascompetitiveleverageusingmanufacturingandoperations,thefitofthe
variouselementsofmanufacturing,andmanufacturingfocus.Inparttwowewill
examinethekeyelementsanddecisioncategoriesinamanufacturingstrategy.These
includefacilitiesandcapacities,technology,andtheotherdecisioncategoriesnoted
above.Ineachoftheseareas,wewillexaminehowdifferentchoicesaffectthebusiness
competitively.

Inthethirdpartofthecourse,wewillexaminehowthesedifferentelementscanbe
combinedintoacoherentstrategy.Wewillexaminedifferentstrategicapproaches,each
ofwhichplacesrequirementsonmanufacturingandoperations,butwhichallowdifferent
meansforcompaniestocompete.Theseapproachesincludecompetingonquality,time,
flexibility,productivity,andnewproducts.Foreachmeansofcompetition,thevarious
pieces,facilities,technologyetc.,mustallbeconsistentwiththestrategicgoal.
Part4examinessomeissuesinmanufacturingpolicyandstrategythatareparticularly
relevanttoday.Forexample,howmuchshouldacompanyoutsource?Canacompany
giveupallofitsmanufacturing?Othertopicsaretheadventofglobalizationandthe
impactoftheweb.Someoftheseissueswillcomeupthroughoutthecourse.For
example,outsourcingandglobalizationarethetwomostprominenttrendsin
manufacturingandoperationstoday.Thesetwothemeswillcomeupthroughoutthe
course.
Inthefinalpartofthecourse,wewilllookatorganizationandimplementation.The
problemsofimplementation,organizationalresistance,environmentalchanges,etc.,can
beformidable,andwewillexaminehowcompanieshavesolvedtheseproblems.
Thecoursewillbebasedlargelyoncasestudies,andsessionswill(hopefully)includea
greatdealofclassdiscussions.Wewillhavesomelectures.Casepacketsareavailable
fromGraphicArts,E52045andincludeallrequiredreadings.Additionalreferences
includeRestoringourCompetitiveEdge,byHayesandWheeelwright,TheMachinethe
ChangedtheWorld,byWomack,Jones,andRoos,DynamicManufacturing,byHayes,
WheelwrightandClark,LeanThinking,byWomackandJones,TheProductiveEdge,by
Lester,andClockspeed:WinningIndustryControlintheAgeofTemporaryAdvantage,
byFine.
ThisclasswillbesomewhatsimilartotheclassIhaveinledinthepastandthefall
versionwithoneimportantdifference.Wewilltrytoincorporatetheexperienceofpast
operationsexperiencessuchastheLeadersinternshipsorsummerjobs.Tothatendyou
haveachoiceontherequiredwrittenmaterial.Thestandardwrittenassignmentswillbe
threecasewriteups.However,youcansubstituteapaperonaspecialtopicforanyof
thecasewriteups.Inaddition,youcanalsowaiveallthewriteupsbyagreeingtodoa
casestudyandaccompanyingteachingnote.Ifyouchoosethisoption,wewouldliketo
usethecaseduringoneoftwoclassperiodsthatwemayuseforthis.Theseclassperiods
aretimedtocoincidewiththecompletionoftwodifferenttopicareas.Ihopetodotwo
suchcasestudiesduringeachoftheseperiods.
Gradeswillbebasedonethirdonparticipationandtwothirdsonwrittenmaterial.You
canworkonthecasewriteupsingroupsoftwoorthree.Bepreparedtodiscussthecase
eachday.Iwilloftenaskforaleadoffeachday.
Weexpecttohaveafewvisitorswithinthecontextofthecurrentsetoftopics,butnotall
ofthesehavebeenscheduled.
2

Thecurrentclassplanisasfollows:
PartI. Manufacturingandoperationsascompetitiveweapons
Tuesday,February6Introductiontocourseandconceptandprinciplesof
manufacturingstrategy.ReadchaptertwoexcerptedfromHayesand
Wheelwright,TheConceptofaManufacturingStrategyinthepacket.
Thursday,February8DevelopingamanufacturingstrategyRead
"AmericanConnectorCompany(A)"andtheHayesandPisanoarticle.
Preparetoanswerthefollowingquestionsforclass:
1. HowseriousisthethreatofDJCtoAmericanConnectorCompany?
2. HowbigarethecostdifferencesbetweenDJC'splantandAmerican
ConnectorsSunnyvaleplant?ConsiderbothDJCsperformance
inKawasakianditspotentialintheUnitedStates.
3. Whataccountsforthesedifferences?Howmuchofthedifferenceis
inherentinthewayeachofthetwocompaniescompete?Howmuchis
duestrictlytodifferencesintheefficiencyoftheoperations?Arethere
differencesinthepatternofdecisionsbydecisioncategory?
4. WhatshouldAmericanConnector'smanagementattheSunnyvaleplant
do?
PartII.

Keyelementsanddecisioncategoriesinamanufacturingstrategy
Tuesday,February13Introductiontodecisioncategories,theroleof
technology.ReadITTAutomotive:GlobalManufacturingStrategy(1994).
Thisclasswillexplorethemanagementofprocesstechnologyforadditional
plants.Wewillexaminequestionsonhowtomanagethedevelopment
strategy.Oneofthequestionstobeexploredishowfaracompanyshouldgo
inimplementingcopyexactly?Preparetoanswerthefollowingquestionsfor
class:
1. Whataretheimplicationsforbothcostandflexibilityofautomation?
Doyouagreewiththeassertionmadebyoneofthemanagersinthecase:
"Ifyouautomate,youstagnate?"
Whatareyourrecommendationsregardingtheissueofstandardizing
processtechnologyacrossallplants?Aretheremotivesbehindthis
proposal,otherthanthosestatedinthecase?
3. AsJuergenGeissinger,howwouldyougoaboutimplementingyour
recommendation?Howwouldyouovercomeresistancefromtheplants?
AsSteveDickerson,theplantmanageratAsheville,NorthCarolina,what
lineofreasoningwouldyouusetoconvinceseniormanagementthatfull
automationisthelessdesirablealternative?

4. AsKlausLederer,whatoptionwouldyouliketoseepursued?Howdo
variousoptionsfitintothebroadercorporatestrategyofITTAutomotive?
5. Ingeneral,whenshouldcopyexactlybeused?
Thursday,February15Facilities,technologyandflexibilityRead"EliLilly
andCompany;theFlexibleFacilityDecision(1993)andtheUptonarticleon
flexiblefactories.Preparetoanswerthefollowingquestionsforclass:
1. Howhasthecompetitiveenvironmentinpharmaceuticalsbeenchanging
overthepastfewyears?Whataretheimplicationsfortheroleof
manufacturingwithinEliLilly?
2. HowdoeseachfacilitiesoptionaffectLilly'scoststructure,capacity
managementandproductdevelopmentcapabilities?Forwhattypeof
productsdoestheproposedflexiblefacilityprovideanefficient(i.e.low
cost)manufacturingcapability?
3. Whattypeofflexibilitydoesthe"flexiblefacility"provide?Whatisthe
valueofthisflexibilitytoEliLilly?HowmuchisLillypayingforthis
flexibility?
4. GivenLilly'sstrategicgoalsinthe1990's,whichoptionshouldSteve
Muellerrecommend?ArethereotheroptionsthatLillyshouldbe
contemplating?Ifso,whatarethey?
Tuesday,February20Noclass,Mondayschedule.
Thursday,February22Thefacilitiesnetworkandsupplychain.
Comparisonsofplantproductivityandoptimizingflow.Read"Applichem
andtheFederowsarticleandpreparetoanswerthefollowingquestionsfor
class:
1.ComparetheperformanceofApplichem's6Releaseeaseplants.
2. Whyweresomeplants"better"performersthanothers?
3. HowwouldyouadviseJoeSpadarotoconfigurehisworldwide
manufacturingsystem?
Tuesday,February27Capacity,environmentalissuesRead"Australian
PaperCompany",AFordRedesign,andthearticleofRondinelliand
Vastag.Preparetoanswerthefollowingquestionsforclass:
1. WhatopportunitiesandrisksdidKenMcRaefaceashecontemplated
takingAPMintothefinepapersmarket?Bespecificwithrespectto
technological,operations,andcapitalinvestment(aswellasother)
considerations.
2. Howhastheenvironmentfaredinthisbattle?
3. AsKenMcRae,whattechnologyandoperationsstrategyoptionsare
available?Whichdoyouthinkheoughttopursue?Why?
Thursday,March1Summarylectureonfacilities,capacityandsupplychain
strategyReaddraftbookchapterbyBeckmanandRosenfieldinpacket.
4

Basedonthecasesfromthepreviousclasses,reviewtheformalmethod
proposedfordevelopingafacilitiesstrategy.
Tuesday,March6Snowday

Thursday,March8Verticalintegration.Option1forfirstcasewriteup.
Read"WhistlerCorporation(A)"andtheSMRreprintonverticalintegration
andpreparetoanswerthefollowingquestionsforclass:
1. WhathasbeenWhistler'straditionalapproachtomanufacturing?
2. Whataretheimplicationsofeachmanufacturingoptionwithregardto:
a)Cost
b)Quality
c)Thecompany'sabilitytointroducenewproducts
d)Responsivenessmarketdemand
3. Whataretherisksassociatedwitheachoftheseoptions?
4. WhatproblemsisCharlesStottlikelytofaceinthenextfiveyearsand
howshouldoperationsbeconfiguredtodealwiththem?
Tuesday,March13Suppliermanagement.NumbersofsuppliersRead
IntelPEDandthearticleaboutHadco.Option2forfirstwriteup.We
hopetohaveparticipatingbyvideohookupDavidGreenstein,LFM97.
DavidworksforIntelandwaspartofthisdecision.Preparetoanswerthe
followingquestionsforclass:
1.AsBrianDavis,whatrecommendationswouldyoumakeregardingthe
twosupplierproposalforthenewBackendprocesstool?Which
supplier(s)wouldyouselectandwhatproblemsisIntellikelytoencounter
inimplementingyourrecommendation?
2.WhatotherchangesinIntel'soperationsstrategywouldyourecommend?
Thursday,March15HumanResourcesandworkforceteams.ReadSedalia
RevisitedandskimtheSedaliacaseforbackground.Readalsochapters10
and14ofTheProductiveEdge,whichareinPartIofthepacket.Professor
JanKleinwillleadthediscussion.Discussionquestionswillbedistributed
beforeclass.
Tuesday,March20Infrastructureandenterprisesystems.Inthisclass,we
willexploretheimportanceofplanningandoperatingsystems,including
todaysenterprisesystemsaswellassystemssuchastheToyotaproduction
system.ReadVandelayIndustries,Inc.andthearticlebyDavenport.
Preparethefollowingquestionsfordiscussion:
1. WhyhasR/3beensuccessful?
2. Whyhavesomanyreengineeringeffortsbeenfailures?Willtechnology
enabledchangemanagementhelpimprovethesuccessrate?
3. WhatarethemajordrawbacksthatyouseeinundertakinganERPeffort?
WhatthemajorworriesatVandelay?

4. WhatcompetitiverequirementsdoesR/3fulfillforVandelay?Whatisthe
strategicroleforplanningsystemsandITsystems/
ThereisnoclassonMarch22duetoextendedspringbreak.
Tuesday,April3Studentcasesonoperationsdecisionscategories
(KennedyonorganizationandPerryoninformationsystems)

PartIII.Differentapproachestomanufacturingstrategy:
Thursday,April5Studentcasesonoperationsdecisioncategories.and
meansofcompetition(GoldbergonprocesstechnologyandSierraon
competingoncost)
Tuesday,April10Competingonquality:sourcesofquality.Read
DelamereVineyardandpreparethefollowingquestionsforclass:
1. WhatareDelameresstrengthsandweaknesses?Whatdoesitdeliverto
customersthatothervineyardsdonot?Whatdoesittaketobe
outstandinginthewinebusiness
2. WhattypesofuncertaintydoesRichardsonface?
3. Whatdoesqualitymeaninwinemaking
4. Whatprinciplesandconceptsshouldoneapplytoimprovingaproduction
systemsuchaswinemaking?
5. WhatshouldRichardsondo?Howwillhispersonalityandexperience
shapehisdecision?
6. Extendingthenotionofquality,whatarethesourcesofqualityfor
manufacturingandserviceoperations?Howtransportablearethey?
Thursday,April12Competingoninnovation:typesofqualityandthe
productdevelopmentprocess.Optiononeforsecondcasewriteup.Read
"BMW:The7SeriesProject"andtheIansitiandWestarticle.Prepareto
answerthefollowingquestionsforclass:
1. Howdoesonedefinequality?
2. WhatarethecausesandconsequencesofBMW'squalityproblemswith
newlylaunchedproducts?Whatshouldbedonetoimprove"launchquality"?
3. WhatareyourrecommendationstoCarlPeterForesterconcerningtheR
seriesprototypes?Whatshouldhedoregardingfuturedevelopmentprojects?
4. WhatchangeswouldyourecommendinthewayBMWdevelopsnew
models?Whatattributesofnewlylaunchedproductswouldyouexpectto
improveasaresultoftheserecommendations?Whichattributesmight
deteriorate?
3. WhatrecommendationswouldyoumaketoChairmanvonKuenheim
regardingBMW'sstrategytocompeteagainstnewJapaneseentrantsinto
theluxurycarmarket?

Tuesday,April17isaholiday.
Thursday,April19Time,customizationandthesupplychainOptiontwo
forsecondcasewriteup.Read"NationalBicycleIndustrialCompany(Part
Iofthepacket)andthearticleonmasscustomizationandpreparetoanswer
thefollowingquestionsforclass:
1.CritiquethePOSconcept.Willitaddressthecompetitivedilemmafaced
byNationalBicycle?
2.WhatarethedifferencesbetweenmassproductionandPOS,andin
particular,howdoesthecostofproducinganddeliveringabicyclediffer?
3.EstimatethecapacityofthePOSconceptwithoutovertime.
4. WhatleadtimeshouldNationalBicycleoffertoitsPOScustomers?
Tuesday,April24CompetingonflexibilityRead"U.S.RoboticsInc.and
thearticlebyUptonthemanagementofflexibility.Preparetoanswerthe
followingquestionsforclass:
1. WhydoesUSRoboticsneed"5by5"?Whyhavesomanyfirmsfailedat
$100msales,andhowshouldUSRavoidsuchafate?Whatkindsof
strategicflexibilityareimportanttoUSRandhowshoulditmaintain
them?
2. ShouldUSRoboticshaveanexplicitmanufacturingstrategy?What
shoulditbe?
3. WhatwillbethemostimportanttypesofshorttermflexibilityforUS
Robotics?Howwillthemanufacturingstrategyyououtlinedsupportthis?
4. HowwillyougrowUSRoboticsOperations?Willyoubreakup
operationsByfunction?Bymarket?Bymanufacturingtechnology?

PartIVCriticalissuesinmanufacturingstrategyandpolicyinthe21st
century
Thursday,April26(tentative)Neworganizationalmodelsandtheirimpacts
onoperations.Thissessionwillfurtherexploretheimpactofnewtypesof
organizationsandinparticularthevirtualorganizationonoperations.Read
CiscoSystems:AcquisitionIntegrationforManufacturing(A)andthearticle
byMaloneandLaubacher.VahErdekian,VPofCisco,willbeourguest.
Preparethefollowingquestionsforclass:
1. IdentifywhatyoubelievearethemostimportantelementsofCiscos
approachtoselectingandintegratingacquisitions?Foreachelement,
describewhyitisimportantanddescribewhetheritwouldbetypicalfor
anycompanydoingacquisitions?
2. Howwouldyouimprovetheprocess?

3. WhatarethespecificchallengesoftheSummaFouracquisition?Does
Ciscoadequatelydealwiththesechallenges?
4. Whatarethechallengesforoperationsandmanufacturingforastrategy
suchasthis?
Tuesday,May1Impactsoftheelectroniceconomy.HowwilltheInternet
affectoperationalstrategiesofthe21stcentury?Wewillexplorethree
possibleareas:thepotentialofthevirtualorganization,throughimprovements
inthesupplychain,andforstrategiesforservicingcustomers.
ReadAdeptecInc.andInsidetheMachine,fromtheEconomist.
Questionswillbedistributedbeforeclass.
Thursday,May3Strategiesinaglobalenvironment.ReadtheEconomist
reprintMeettheGlobalFactoryandTheCaseforFlexibility(B):Xerox
LaserPrinters.Thisclasswillexploresomeoftheparticularissuesina
globalenvironment,suchasflexibilityandlongleadtimes.Preparethe
questionsattheendofthecase.PaulLambert,Sr.V.P.fromPolaroidwillbe
ourguestforpartofthediscussion.
Tuesday,May8Outsourcingandpowerandcontrolandthetechnology
supplychain.ReadtheMITcaseGripShift:JustaShootingStar(A),the
NewYorkTimesarticleonoutsourcing,andtheexcerptsofthebookbyFine
andpreparetoanswerthequestionsonpage10ofthecase.
Thursday,May10Studentcasesonintegratedstrategies(Wu,Wilhelmi)

PartVImplementingamanufacturingstrategy
Tuesday,May15Finalcasewriteup.Stagesofimplementation.Read
"CopelandCorporationEvolutionofaManufacturingStrategy:19751982".
Preparetoanswerthefollowingquestionsforclass:
1. InwhatwayshasCopeland'smanufacturingstrategychangedbetween
1975and1982?
2. WhatdidthecompanylearnfromitsexperiencesatHartselle,Rushville,
andShelby?
3. HowshouldtheSidneyplantbefocused?
4. Whatimplementationissuesdoyousee?
Thursday,May17Wrapup,conclusionsandthefutureofoperations.