Manufacturing Strategy MGSC 602 Prof. Saibal Ray

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Manufacturing StrategyMGSC 602Prof. Saibal Ray

• Module 3 Designing and Implementing Operations
  Improvement Strategies
• Module Wrap-Up
• Handout 7

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Designing, Managing and Improving Operations

• Process Design, Management and Improvement
• Operations Systems and Information Technology
• Designing and Implementing Improvement Strategies

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List of Cases

• Integron Inc. The ICD Division
• ATT Universal Card Services Operation
• Daewoo Shipbuilding and Heavy Machinery
• Samsung Shipbuilding and Heavy Industries
• HMS Thetis and Apollo XIII
• PPG Berea Developing a Self-Directed Workforce
• Vickers Inc. (Omaha Plant)
• Deloitte and Touche Consulting Group
• Pacific Dunlop Beijing
• Micom Caribe

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Operations Level Improvement as the key to
continued competitiveness

• Mechanisms for Change
• Everyone catches up so the winner becomes a
  qualifier
• Competitor develops unheard of performance on a
  qualifier

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Some fundamental questions

• Are plants efficient in manufacturing
  performance?
• Evidence implies not
• Is the individual firm subject to a tradeoff in
  performance dimensions (improvement as
  positioning) Quality is Free?
• c. Can you improve on multiple dimensions at
  once?
• Daewoo architectural
• understanding but difficult

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World Class

• The idea of World Class provides a practice and
  performance beacon for plants like ?
• Not helpful for plants like
• ? they create the (moving) frontier
• Dangerous for plants like
• ? they dont think about strategy
• More important - what to be World Class at?
• Why try to imitate set the standard for World
  Class

World Class Frontier
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Positioners and Improvers Two philosophies at
odds that need not be
Competitive Dimension 2

• Positioners argue that
• world-class ignores strategic positioning
• plants like ? cant exist
• Improvers argue that
• world-class is inherently a lagging strategy
• and that positioners ignore operations innovation
  as a source of advantage
• Plants need to do both!
• Need for an Improvement Strategy...

Improvers
Positioners
?
World Class Frontier
Competitive Dimension 1
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• Operational effectiveness is a necessary
  condition, but is not sufficient
• Strategic Intent and Insights are important in
  developing a successful strategy
• The solution is to continually learn (very
  difficult) and develop capabilities that will not
  only help in the present market but also will
  open up new markets

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Learning How to Learn

• We know firms have capabilities
• But they also have specific ways to change
  capabilities
• Samsung, Daewoo showed us that operations learn
  how to learn, and can then get stuck in that
  improvement mode
• Core capabilities can become core rigidities
• A dilemma
• Should you learn the way youve always done it
  (you know that way best)
• ..Or glean the advantages from a way you dont
  know, but that may hold great opportunity

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How to Learn?

• Systematic problem solving
• Experimentation
• Learning from past experience
• Learning from others
• Transferring knowledge

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Absorptive Capacity

• The ability to assimilate and use new knowledge
• It requires prior knowledge some related and
  some not related
• Two features of absorptive capacity
  cumulativeness and effect on expectation
  formation
• Failure in developing absorptive capacity leads
  to lock-out
• Developing capabilities requires absorptive
  capacity which requires continuous learning

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Diagnosis of an Operation

• Role
• What stage is the plant in?
• What is the role of the plant?
• Structural alignment (Fit)
• Executional Performance (Control)
• Improvement Strategy and Rate

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Levels of Capability

• SSTAGE 1 Internally Neutral (Make it, deliver
  it, without messing up too badly)
• SSTAGE 2 Externally Neutral (We are as good as
  our competitors plants of this kind)
• SSTAGE 3 Internally Supportive (We are shaped to
  provide clear, credible support to our firms
  competitive strategy)
• SSTAGE 4 Externally Supportive (This plant is a
  significant contributor to our competitive
  position)

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Role, Fit

• How do they define their role?
• How do they define success does it fit with the
  competitive strategy?
• How is the business changing?
• Looking for
• Single, parochial measures no idea about
  competitors
• Upcoming mismatch
• Physical measures Profit is a lagging indicator

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Is it in control?

• Control is a necessary condition for improvement
• Indicators
• Inventory management
• Rush orders/expediting
• Talk to the folks
• Do they know whats going on? Training?
• Shared Values
• Housekeeping
• Too many buffers
• Scheme of the Week suggests lack of long-term
  control

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Improvement (Operations) Strategy

• Context (Why)
• Goals (What)
• Focus (Where, What level)
• Tools, Methods (Using what?)
• Resource (How much, What kind)
• Organization Phasing
• Learning Capture

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The Seven Elements of an Improvement Strategy
Element Issues Examples

• 1. Context Why is the improvement needed? Change
  in customer needs,
• change in winners/qualifiers,
• new competitor
• 2. Goals What dimensions or performance Bring
  average lead time to 4
• will be improved? How will they days Bring
  manufactured
• be measured? Cost to 400/ton
• 3. Focus What will be the primary
  areas Manufacturing processes,
• of attack? Coordinative processes,
• sourcing
• 4. Methods and What methods will be used? Total
  Quality, SPC, SMED,
• Techniques JIT, MRP, self-directed
• workteams, etc.
• 5. Resources How much money? How many 200k, 15
  people, 24 months
• people? How much time? with 6 month
  milestones

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Benefits of an Explicit Operations Strategy

• Guiding project selection
• Providing continuity
• Building predictability
• Allowing changes in direction to be made explicit

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Maybe well begin to see fewer of these

• This operation will be a high quality, low cost
  facility providing outstanding flexibility and
  customer service. We commit to generating the
  most innovative products at the leading-edge of
  technology. We pride ourselves on safety and care
  for the environment. We will strive to be
  world-class on every dimension.
• The strategic Planning Team please post

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• But where do I start?
• Six ideas

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1. Concentrate on a sub-Area of Operations

• Functional Improvement
• Variety of Criteria for Selection
• Area of weakness (e.g. inventory or factory cost)
• Area of opportunity (e.g. workforce problem
  solving)
• Area for corporate-wide concern (e.g. quality,
  flexibility)
• Area of major decision (e.g. automation project)
• Build grass roots support
• Fundamentally change the way work gets done

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2. Demonstrate what can be done

• Demonstration Project
• Tackle a major project involving several
  functions
• Provide a credible demonstration of how it
  would work in your organization
• Focus attention and resources to realize a
  significant success
• Set new standards for expectations performance,
  procedure and rewards
• Revise systems and procedures to prevent
  backsliding and encourage new behaviors

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3. Establish an external comparison process

• Continuous Benchmarking
• Expose people to the outside world so they can
  see the success
• Competitive Benchmarking
• E.g. Daewoos physical benchmarks
• Customer Feedback Systems
• But remember to be careful about competitive
  convergence the comparison should be very
  specific depending on what is the focus of the
  organization

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4. Pursue a Comprehensive Operations Strategy

• Operations Strategy Restructure
• Assess past pattern of operating decisions
• Determine which patterns need to be changed to
  fit the business strategy/provide distinctive
  advantage
• Identify what drives those patterns
• Pursue a systematic change in the drivers

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5. Business Process Improvement

• Re-engineering
• Focus on Processes across existing business
  functions
• Fundamental
• Radical
• Dramatic
• Focus on Processes (not departments) very
  appropriate now
• A Clean sheet approach vs. Technology driven
  (SAP case)
• One of many such approaches over the years

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6. Grass-Roots improvement

• Empowerment
• Focus on training at the lowest levels in the
  organization
• Push decision making down
• Very hard to do well BS by the truckload
• Post-rationalized recognized after the fact
• How much empowerment how much autonomy how
  much decision-making

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Contrasting Approaches to Getting Started

• Approach Advantages Disadvantages
• 1. Series of sub-areas of Broad Based
  Support - Operations only
• operations Correct Principles
  - Slow, lacks momentum
• 2. Business-Wide Multifunctional
  - Discounted as not
• Demonstration Project Dramatic,
  visible results normal
• - Systems left unchanged
• 3. External Comparison External, objective
  - Difficult to make
• Processes reference
  permanent
• Source of new ideas - Assumes
  organization
• can/will utilize results

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Contrasting Approaches

• Approach Advantages Disadvantages
• 4. Comprehensive Senior Operating Focus
  - Requires
• Operations Strategy Plan Logical
  Implementation
• - Doesnt spread
  easily
• 5. Reengineering Process-based - more
  - Step Change-based
• appropriate
• - Minimal Focus on
  Learning
• 6. Grass-roots Build Skills at the
  - Can meander badly
• Improvement lowest levels in the
  - Structure is a key
• organization

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The Challenge
?
The Sputtering Heroes We fought fifteen 1
year Wars not a 15 year war.
Act of Faith I think I can I think I can
Improvement Planning I know I can. I designed
it that way.
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DMIO

• Process Design and Improvement
• (Solagen, DAV, Cummins)
• (2) Systems
• (the new toolbox Kanebo
• DEC Endpoint, FASTech, Crane)
• (3) Improvement
• choice of method and implementation
• (Daewoo, Samsung, PPG, Micom)

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Characteristics of Effective Leaders of Change in
Operations

• Establish an encompassing, articulated direction
  for the operation
• Set the agenda and focus the operations
  attention and effort
• Teach knowledge and skills throughout the ranks
• Wholesale distribution of decision-making to
  people not just lowest ranks
• Personal commitment to leading the change

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WORD OF CAUTION

• Remember that no competitive advantage will last
  forever
• What seems most rational today will look foolish
  tomorrow
• We can only hope to extend the reign as long as
  possible by developing capabilities and strategic
  positioning