Manufacturing Strategy

1
Manufacturing Strategy

• Strategy - a careful plan or method
  (Merriam-Webster dictionary)
• Company strategy is the plan of where the company
  is headed, or its approach to success
  (increasing shareholder value).
• A companies strategy is typically formed by
  upper-level management. Strategies developed at
  lower levels in a company should support the
  over-riding corporate strategy.

 
2
Manufacturing Strategy

• Dimensions of Manufacturing Strategy
• Core Competencies
• Customer Markets and Distribution
• Vertical Integration
• Level of Flexibility

 
3
Manufacturing Strategy

• Core Competencies what a company thinks or
  strives to be good at.
• Possible core competencies
• Product development (new features or technology)
• Manufacturing
• Quality
• Customer relations
• Time to delivery
• Cost
• Consistency of product

 
4
Manufacturing Strategy

• Core Competencies cont.
• Kuglin 1998 characteristics of core
  comptencies
• Facilitate access to markets
• Be perceived by customers as adding significant
  value to products
• Be difficult to imitate, thus providing a
  barrier to competitors

 
5
Manufacturing Strategy

• Customer Markets and Distribution
• Geographic location
• Market segment
• Automotive (Chevrolet, Pontiac, Buick, Cadillac)
• Clothing (Eddie Bauer, Gap, Old Navy, Talbots)

 
6
Manufacturing Strategy

• Vertical Integration company owns two or more
  stages of production
• Example Ford Rouge complex
• Companies may expand into related products auto
  manufacturers expanded into the credit and
  leasing business, and the car rental business
  (good moves), they expanded into Aerospace (bad
  move).

 
7
Manufacturing Strategy

• Level of Flexibility the ease and extent to
  which a facility can adapt to change
• volume flexibility
• expansion flexibility
• product flexibility

 
8
Manufacturing Strategy

• Make vs- Buy
• Make parts internally or outsource?
• Do parts give you a competitive advantage from a
  design, cost, quality, or other factor? (made in
  USA?)
• 
  Insert Fig 4.1
• Let C startup cost to produce product
• c1 production cost per part
• c2 purchasing cost per part

 
9
Manufacturing Strategy

• Make vs- Buy
• Make parts internally or outsource?
• Do parts give you a competitive advantage from a
  design, cost, quality, or other factor? (made in
  USA?)
• 
  Insert Fig 4.1
• Let C startup cost to produce product
• c1 production cost per part
• c2 purchasing cost per part

 
10
Manufacturing Strategy

• Maketo-Stock versus Make-to-Order
• In general, high volume products are made to
  stock
• Customized products are made to order (current
  trend towards mass customization)
• Decision highly related to corporate strategy
• Do customers only buy what they can see?
• Is order-to-delivery time a competitive
  advantage?
• Is inventory reduction desirable?
• Is the product life-cycle short?
• Will mass-customization sell products?
• Economic models

 
11
Manufacturing Strategy

• Selection of Technologies and Equipment
• What type of sophistication should be used in
  the production process (i.e. manual,
  semi-automated, highly-automated, flexible
  automation, custom machine tools, etc)?
• Considerations
• Variety of products
• Volume (length of product life cycle)
• Quality requirements
• Capital expenditures versus operational variable
  costs
• Worker safety and morale
• Improved order-to-delivery time
• Inventory reduction
• Corporate image (high-tech, green, worker
  friendly, etc)
• Economic models