Manufacturing

Strategy Concepts

Manufacturing is Complex
WHY ?
Manufacturing is complex because it involves;
- large number of employees (skilled or unskilled)
- formal and informal system or procedures
- good and bad practices
- old and new culture
Manufacturing changes slowly as it takes time to:
- build facilities
- install new equipment
- develop new suppliers,
- change operating procedures
- train personnel
While customer requirements changes quickly.

Manufacturing Strategy
Business Strategy
A companys business strategy is the sum of individual
strategies of its component functions i.e. manufacturing,
marketing & sales, R&D, finance etc.
Manufacturing Strategy
A manufacturing strategy consists of a sequence of
decisions that over time enable a business unit to achieve
a desired manufacturing structure, infrastructure and set of
specific capabilities.

Taxonomy of Manufacturing
Strategy

Figure 1: Retrieved from Restoring Our Competitive Edge by R.H. Hayes & S. C. Wheelwright and from
4
Manufacturing Strategic Planning by D. A. Garvin.

Functional Strategies
The third level of strategy is comprised of functional strategies.
Once business unit has developed its business strategy, each
functional area develop strategies that support this strategy.
Usually manufacturing business has the following functional
strategies:
1.Marketing & Sales Strategy
2.Manufacturing Strategy
3.Research & Development Strategy
4.Accounting and Financial Strategy
5.Quality Assurance
6.Field Maintenance etc
To be effective, each functional strategy must support the
competitive advantage being followed by the business strategy.

Manufacturing Strategy Decision

Categories
Structural

Manufacturing Strategy

Infrastructural

Figure 2: Decision Categories of Manufacturing Strategy

Manufacturing Strategy Decision

Categories
The first four decision categories in Figure 2 are typically viewed as
structural because of their long term impact, difficult to reverse
once they are in place and large investment required to extend or
alter.
The last four decision categories in Figure 2 are considered to be
infrastructural (tactical) because they encompass multiple ongoing
decisions, are linked with specific operating aspects of business and
generally do not require high capital investments.
These eight decision categories are closely interrelated. For
example total annual capacity of the manufacturing facility depends
on whether its production rate is maintained at about the same level
or changed frequently. Similarly, workforce policies interact with
facility and production planning choices.

Manufacturing Strategy Decision

Categories

or vertical integration

Table 1: Manufacturing Strategy Decision Categories

Manufacturing Strategy Decision

Categories
Management make decisions and formulate strategies in
all these categories.
Each of the category provides variety of choices and can
have a major impact on manufacturing functions ability
to implement and support the organization's business
strategy.
It is critical that decisions made throughout in the
organization at all levels must be consistent with other
decisions made at other point in time and within other
categories.

Criteria for Evaluating a

Manufacturing Strategy
Consistency
Between the manufacturing strategy and the overall business strategy
Between the manufacturing strategy and the other functional strategies within
the business
Among the decision categories that make up the manufacturing strategy
Between the manufacturing strategy and the business environment (resources
available, governmental restraints etc.)
Contribution (to competitive advantage)
Making tradeoffs and enabling manufacturing to set priorities that enhance the
competitive advantage
Promoting clarity regarding the manufacturing strategy throughout the
business unit so its potential can be realized
Providing the manufacturing capabilities that will be required by the business
in the future

Key Output Parameters

(KOPs)
in
Manufacturing
A customer buys a product or service because of his/her
perception of

Cost
Quality
Delivery time
Flexibility

Cost
Initial Cost
(e.g. purchase cost of an automobile)
Operating Cost
(e.g. gasoline cost per mile)
Maintenance Cost
(e.g. cost of a tune-up/repair)

Product Quality
Product quality directly influences the marketability of a product and
customer satisfaction. Product with high quality should provide
following characteristics;
Performance: The basic operating characteristics of a product; for
example, how well a car handles its gas mileage.
Features: The "extra" items added to the basic features, such as a
stereo CD or a leather interior in a car.
Reliability: The probability that a product will operate properly within
an expected time frame or the measure of confidence of a consumer
towards a particular product.
Eg. a Sony TV will work without repair for about seven years.
Conformance: The degree to which a product meets pre-established
standards. There should be an agreement between the designed and
the actual product standard to meet customer specifications.
E.g. Mercedes Benz state of the art standardization and conformance

Reliable vs. Valid

Reliability = Stability = Precision

Validity = Conformance = Accuracy

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Product Quality
Durability: How long the product lasts; its life span before replacement
or a capability of a product to resist wear and tear or decay etc.
A Moltifoam, with care, might be expected to last a lifetime.
Serviceability: The ease of getting repairs, the speed of repairs, and
the courtesy and competence of the repair person.
Aesthetics: How a product looks, feels, sounds, smells, or tastes.
Safety: Assurance that the customer will not suffer injury or harm from
a product; an especially important consideration for automobiles.

QUALITY FROM THE CONSUMERS

PERSPECTIVE
Time and timeliness: How long a customer must wait for service. For
example, is an overnight package delivered overnight?
Completeness: Is everything the customer asked for provided? For
example, is a mail order from a catalog company complete when
delivered?
Courtesy: How customers are treated by employees. For example,
are phone operators at PTCL nice and are their voices pleasant?
Consistency: Is the same level of service provided to each customer
each time? Is your newspaper delivered on time every morning?

QUALITY FROM THE CONSUMERS

PERSPECTIVE
Accessibility and convenience: How easy it is to obtain the service.
For example, when you call KESC does the service representative
answer quickly?
Accuracy: Is the service performed right every time?
Is your bank or credit card statement correct every month?
Responsiveness: How well the company reacts to unusual
situations, which can happen frequently in a service company. For
example, how well a telephone operator at worldcall is able to
respond to a customer's questions about a query not fully described in
the instructional manual / website.

Delivery
Before Delivery:
Ease of Ordering (ability to order over Internet, phone)
Availability (in-stock)
Speed (lead time - elapsed time from placement of order until its
receipt)
Information Availability (use Internet for real-time order status)
After Delivery:
Accuracy/Completeness (correct items in correct quantities)
Dependability (on-time delivery)
Quality after Shipment (breakage)
Ease of Return
Customer Support

Flexibility
1.

Machine flexibility
Capability of a machine to perform a variety of operations on a
variety of part types and sizes. It depends on changeover, ease of
machine programming, tool storage capacity etc.

2.

Routing flexibility
Alternative machines, sequences or resources can be used for
manufacturing a part for changes resulting from equipment
breakdowns, tool breakages, controller failures, etc.
It depends on the similarity of the parts in the mix, similarity and
duplication of workstations etc.

Flexibility
3. Process flexibility
Ability to absorb changes in the product line by performing similar
operations.
The process generalization method which can be used for more than
one product .
e.g. painting a car is a flexible process which have a generalized range
of car sizes that it can adapt to.
4. Product flexibility
Ability to change over to a new set of products economically and
quickly in response to markets.
Different variants in a model but closely related in design
e.g. Ford producing mini trucks as well as SUVs ; cell phones of
different models

Flexibility
5.

Production flexibility
Ability to produce a range of part styles / products that can be
produced on the systems without adding capital equipment /
investment.

6.

Volume flexibility
Ability to economically produce parts in high and low quantities of
production in order to respond unanticipated demand to meet
customer needs. It depends on the level of manual labour
performing production, amount invested in capital equipment
etc.

Flexibility
7.

Expansion flexibility
Ease with which the system can be expanded to increase total
production quantities . It depends on the expense of adding the
workstations, ease with which layout can be changed / expanded,
type of part handling system used, ease with which properly trained
workers can be added.

Output Parameters in
Manufacturing
J. Miltenburg (2007) divided manufacturing outputs in six
categories, given in Table 2.

Quality

Volume flexibility

Product flexibility

Table 2: Manufacturing Outputs

Output Parameters in
Manufacturing
Mapes et al (1997) divided manufacturing outputs in seven
categories, i.e. cost, quality consistency, quality specification,
lead time, delivery reliability, flexibility, and innovativeness.
1.The difference in the number of outputs is due to the lack of
generally accepted definitions of these key concepts.
2.The difference in the number of outputs is because of the
level of analysis. If the level of analysis is an entire company
then a smaller number of broader manufacturing outputs can be
appropriate.
However, if the level of analysis is a small factory that uses
single production system to produce limited products then a
slightly larger number of narrowly defined manufacturing
outputs is useful for developing strategy.

Output Parameters in
Manufacturing
No factory in the world can provide all outputs at the
highest possible levels, so it is important which output is
important to customers now and which will be important in
the future.
Once we know which outputs customers require, then we
can select the production / manufacturing system that is
best able to provide these outputs

Classification of Production Systems

Process layout
Purpose built equipment

Engineering & moulding

Automotive

Petrochemicals

Product layout

Figure 3: Classification of Production Systems (J. Miltenburg ;2007)