competing through manufacturing 35e00100 service operations and strategy #1 fall 2015

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Competing through Manufacturing 35E00100 Service Operations and Strategy #1 Fall 2015

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Page 1: Competing through Manufacturing 35E00100 Service Operations and Strategy #1 Fall 2015

Competing through Manufacturing

35E00100 Service Operations and Strategy#1 Fall 2015

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Topics

Introduction Why manufacturing management is important? Basics of manufacturing planning and control

Manufacturing strategy Key elements Alternative paradigms

Manufacturing capability

Strategic choices

Best practices

Summary

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Sales / Marketing Function Is Important...

Discounts

Bonuses

TaxesPrices

Campaigns

Sales activities

J F M A M J J A S O N D

Project

Configure

MTO

Wholesale e-Sales

Service sales

Directdelivery

Contractdeliveries

MTSContracts

Product specifications

Currencies

Retailing

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Role of Manufacturing Management

Controlcosts

Understandcustomer needs

Deliverright quantity

Execute on time

Strategic fit

ManufacturingPlan, Execute,

Control

Meet customerrequirements

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The Basic FrameworkManufacturing Planning and Control (MPC) System

Front end

Engine

Back endVendor systems

Shop floor systems

Material and capacity plans

Detailed material planning

Detailed capacity planning

Resource planning

Production planning

Demand management

Master production scheduling

Vollmann et al. 1997, 5

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Detailed scheduling

Information Flows in Manufacturing

Modified fromPinedo and Chao 1999, 7

Shop floor management

Material requirements planning, Capacity planning

Production planningMaster scheduling

Scheduling and Rescheduling

Dispatching

Material requirements

OrdersDemand forecasts

Schedule

Shop ordersRelease dates

Job loadingShop status

Schedule performance

Scheduling constraints

Capacity status

Markets / Customers

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Mfg strategy

Typical responses

Shorter product life cyclesTime-based competition

Quality requirements

Flexibility /responsivenessReduced overhead costs

AutomationCell manufacturing

Simplification

MRPJIT

Technology

Products

Processes

Systems

Techniques

MPC System Must Respond to the Environment

Marketplace dictates

Company strategy

Manufacturing processes

Forces for change

MPC systemVollmann et al. 1997, 10

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What Is Manufacturing Strategy?

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Author Manufacturing strategy connotation Skinner (1969) Refers to exploiting certain properties of the mfg function as a competitive weapon.

Hayes and Wheelwright (1985)

A sequence of decisions that over time, enables a BU to achieve a desired mfg structure, infrastructure and set of specific capabilities.

Fine and Hax (1985)It is a critical part of the firms's corporate and business strategies, comprising a set of well coordinated objectives and action programs aimed at securing a long-term sustainable advantage over competitors.

Hill (1987)It represents a coordinated approach which drives to achieve consistency between functional capabilities and policies and the agreed current and future competitive advantage necessary for success in the marketplace.

Swamidass and Nevell (1987)

The effective use of manufacturing strengths as a competitive weapon for the achievement of business and corporate goals.

McGrath and Bequillard (1989)

Overall plan for, how the company should manufacture products on a world wide basis to satisfy customer demand.

Hayes and Pisano (1994)

In today's turbulent environment a company more than ever needs a strategy that specifies the kind of competitive advantage it is seeking in the markeplace and articulates how that advantage is to be achieved

Berry et al. (1995)The choice of a firm's investment in processes and infrastructure that enables it to make and supply its products to chosen markets

Cox and Blackstone (1998)

A collective pattern of decisions that acts upon the formulation and deployment of mfg resources. To be most effective, mfg strategy should act in support of the overall strategic directions of business and provide for competitive advantage.

Brown (1999)Driving force for continual improvements in competitive requirements / priorities and enable the firm to satisfy a wide variety of requirements.

Many Definitions Have Been Offered…

Dangayach & Deshmunkh 2001, 886

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ManufacturingCapabilities

Case-orientedStudies

Alternative Paradigms of Mfg Strategy

1950s

1970s

2000s

1960s

1980s

1990sStrategic Choices Best

Practices

In the future?• Performance measurement• Effect of organizational

customer on mfg strategy• MS and green mfg• Relevance of mfg strategy

to SMEs• Sector-specific strategies

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Cycles of Manufacturing Strategy

Voss 1995, 14

World class mfgBenchmarkingBPRTQMLearning from the JapaneseContinuous improvement

BestPractices

Order winnersKey success factorsGeneric mfg strategiesShared vision

ManufacturingCapabilities

Contingency approachesInternal and external consistency

Choice of processesFocus

Process and infrastructure

StrategicChoices in

Manufacturing

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Voss 1995, 14

Cycles of Manufacturing Strategy

Order winnersKey success factorsGeneric mfg strategiesShared vision

World class mfgBenchmarkingBPRTQMLearning from the JapaneseContinuous improvement

Contingency approachesInternal and external consistency

Choice of processesFocus

Process and infrastructure

BestPracticesManufacturing

Capabilities

StrategicChoices in

Manufacturing

A

B

C

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Development of Mfg Strategy

Business strategy concepts that have influenced manufacturing strategy

Value chain analysis (Porter 1986)

Core competence (Prahalad & Hamel 1990)

BPR (Hammer 1990, Hammer & Champy 1993)

Competing on capabilities (Stalk, Evans & Shulman 1992)

Noteworthy steps Manufacturing as a competitive weapon (Skinner 1969)

Focused factories (Skinner 1974)

Evolution of manufacturing strategy (Wheelwright and Hayes 1985)

Time-based competition (Stalk 1988)

Process management Supply chain management

A

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• Manufacturing should actively seek to influence corporate strategy and to develop and exploit manufacturing capability proactively.

• Manufacturing (and operations) have been a limited contributor to competitive advantage since most companies are stuck at stage 2.

Stage 1

InternallyNeutral

“Minimizemanufacturing’s negative impact”

Stage 2

ExternallyNeutral

“Achieve parity with

competitors”

Stage 3

InternallySupportive

“Providecredible support to the business

strategy”

Stage 4

ExternallySupportive

“Manufacturing as a

significantcontributor

to competitive advantage”

Wheelwright & Hayes 1985, 3

Evolution of Manufacturing StrategyA

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Matching Process Choice with Strategy The original product-process matrix by Hayes and Wheelwright (1979)

Product structureProduct life cycle stage

One of a kind

Commodity product

Jumbled flow (job shop)

Low volumes; many products

High volumes;few products

Void

Sugar refinery

Disconnected line flow (batch)

Connected line flow (assembly line)

Continuous flow

Void

Commercial printer

Heavy equipment

Auto assembly

Process structureProcess life cycle stage

I

II

III

IV

Flexibility& Unit cost

Product VarietyHigh Low

Low

High

B

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Studies Linked to Product-Process Matrix

Effectiveness of the matrix in explaining operating mfg strategies

McDermott and Greiss (1994) Noori (1990, 1991) Miller and Roth (1994) Safizadeh et al. (1996)

Applications to the analysis of manufacturing performance

Hanson et al. (1993) Voss (1995)

Robustness of the original set of practices and trade-offs

Flynn et al. 1999

0 100 200 300 400 500 600

100

200

300

400

500

600

Link between process and product (Ahmad and Schroeder 2002)

Significant, but not strong Innovative initiatives used by off-diagonal

companies

B

Product type

Pro

cess

typ

e

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World Class Manufacturing (WCM) Background

Initiated by the increasing competitiveness of Japanese in the early 80s Behavior among U.S. Manufacturers

Wide implementation of improvement programs such TQM and JIT Use of programs as solutions rather than as stepping-stones

Development of the WCM concept Hayes and Pisano (1986) coined the term

Criticized that lean manufacturing, continuous improvement or WCM are not strategies to gain competitive advantage

Schonberger (1986) “Blended management marshals resources for continued, rapid improvement” Introduced a 17-point action agenda to guide toward mfg excellence

Hanson et al. (1994) and Collins et al. (1996) “WCM is the achievement of standard in both practice and performance that allows to equal or surpass the very

best international plants.” Made empirical analyses in Europe and developed a simple framework.

C

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Factors MeasuredMade in Europe Study

Organization and culture Vision and strategy Management style Employee involvement Training Benchmarks Job flexibility Problem solving Customer orientation Design process

Plant and equipment Layout and automation Batch sizes and kanban Order release Warehousing Maintenance Housekeeping Priority orders

Business Measurement Market share Customer satisfaction Employee morale Inventory turnover Cash flow Return on net assets Productivity and costs Performance measurement

Opinions about Relative competitiveness Strategy priorities Inhibitors of vision Time frame of improvement Sources of external advice

Background info Size of the firm, etc.

C

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Industry Makes a Difference

Metal+ New product yield+ Product reliability+ Order processing– Priority orders– Cycle times– Training

Paper & Wood+ Order processing+ Supplier lead times+ Customer deliveries– Scrap / rework– Defects– Batch sizes

Chemical+ Training+ Product reliability+ Deliveries– Cycle times– Stock holding– Design process

Electrical+ Preventive maintenance+ Information systems+ Equipment changeover– Deliveries– New product yield– Cycle times

Food & Drink+ Cycle times+ Deliveries+ Inventory turns– Batch sizes– Business mgmt– Preventive maintenance

Machinery+ Stock holding+ Batch sizes+ Information systems– Warranty claims– Product reliability– New product yield

Hanson et al. 1994, 14

C

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WCM in EuropePerformance/Practice Framework and Results from Finland

50 %

60 %

80 %

Practice

Pe

rfo

rma

nc

e

50 60 80 %

Worldclass

Won’t go the distance

Promising

Contenders

Makeweights

Punch-bags

Hanson et al. 1994, 8

C

0 %

0 %

39 %

22 %

4 % 35 %

Finnish mfrs ≥ 5 % better Mfg strategy Market share Information systems Equipment layout

Finnish mfrs ≥ 5 % worse Deliveries Inventory turns Warranty claims Business process mgmt Benchmarking

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Key Points

Manufacturing also matters! MPC systems

A basic structure exists Change along with technology, products, market requirements, etc.

Manufacturing strategy Its definition is somewhat ambiguous. Typically at least one of the following is included:

Competitive priorities (cost, quality, delivery time etc.)

Manufacturing approach (MTS, MTO, ATO etc.)

Outsourcing (Make-or-buy)

Alternative paradigms support each other.

Industries and countries differ…

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Abbreviations Used

ATO = assembly-to-order

BPR = business process re-engineering

JIT = just-in-time

Mfg = manufacturing

MPC = manufacturing planning and control

MRP = materials requirements planning

MS = manufacturing strategy

MTO = manufacture-to-order

MTS = manufacture-to-stock

TBC = time-based competition

TBM = time-based management

TQM = total quality management

WCM = world class manufacturing