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MANUFACTURING STRATEGY

MARCOS BUESTAN PH.D.


A company’s manufacturing function typically is either a
competitive weapon or a corporate millstone, it is seldom
neutral.

W. Skinner
THE DECISION AREA OF THE OPERATIONS MANAGER

PROCESS
STRATEGY
- goals
- products/market choices
- competitive factors

MARKETING TASK OPERATING TASK FINANCE TASK

What must the factory do


especially well in order to support
the strategy?
BUSINESS/FUNCTIONAL
STRATEGY
OPERATING STRATEGY

Operations strategy is a functional strategy


(compared to a marketing or finance strategy)
which supports through a consistent and actual
pattern of decisions the competitive advantage
sought by the overall competitive strategy.
Manufacturing strategy is the pattern of structural and
infrastructural decisions. It determines the specific
manufacturing capabilities.

R. Hayes and S. Wheelwright (1984)


MANUFACTURING’S
COMPETITIVE ROLE
• Internally neutral: reduce manufacturing’s negative
potential
• Externally neutral: catch up with the competitors
• Internally supportive: support the business strategy
• Externally supportive: co-determine the business strategy
OPERATIONS STRATEGY
DEVELOPMENT
• Statement of competitive strategy

• Definition of operating task


• competitive priorities
• identification of key manufacturing competence(s)

• Audit of current operating system


• how is it now set-up, organised, focused and manned
• what is it especially good at
• what does it imply of the competitive priorities
• is it internally consistent

• Changes required to implement the key operating task


THREE INPUTS TO A BUSINESS
STRATEGY
COMPETITIVE PRIORITIES
(FACTORS)
• Abilities which are necessary to qualify for and/or help to win
orders in the marketplace
• They are a function of the key buying factors applied by the
customer and of the competitive environment of the
organisation
• A distinction should be made between orderwinners,
qualifiers and none-issues
COMPETITIVE PRIORITIES
• PRICE
• Ability to profit in price competitive markets
• FLEXIBILITY
• Ability to customise products and services to customer needs

• Ability to make rapid volume changes

• Ability to offer a broad product line

• Ability to make rapid product mix changes


COMPETITIVE PRIORITIES (2)
• QUALITY
• Ability to offer consistent quality with low defects

• Ability to provide high performance products or product


amenities
• DELIVERY
• Ability to provide fast deliveries

• Ability to make dependable delivery promises


COMPETITIVE PRIORITIES (3)
• SERVICE
• Ability to provide effective after-sale service

• Ability to provide effective product support

• INNOVATIVENESS
• Ability to introduce new products quickly
COMPETITIVE PRIORITIES
• ORDER WINNERS
Those abilities you have that make your customers prefer you
over your competitors
• QUALIFIERS
Those abilities you need to get into the game
• NON-ISSUES
Those abilities that do not enter into the competitive picture for
that market niche
THE NEED FOR TRADE-OFFS
COMPETITIVE PROFILE
For each competitive priority, circle the number on the left-hand scale that indicates the degree of importance to the business unit in
competing in the marketplace over the next 5 years.
On the right-hand scale, circle the number that best describes your business unit’s current competitive strength relative to the competitor
who does it best in your industry. Note that if you circle the same number for two items, it implies that the two items are of approximately
equal importance.

REQUIRED COMPETENCES COMPETITIVE PRIORITIES EXISTING COMPETENCES

IMPORTANCE TYPE DEGREE OF STRENGHT


Very unimportant (*) Much Weaker
Very important Much Stronger

1 2 3 4 5 6 7 PRICE 1 2 3 4 5 6 7
PRODUCT FLEXIBILITY
1 2 3 4 5 6 7 1 2 3 4 5 6 7
1 2 3 4 5 6 7 VOLUME FLEXIBILITY 1 2 3 4 5 6 7
1 2 3 4 5 6 7 MIX FLEXIBILITY 1 2 3 4 5 6 7
BROAD PRODUCT LINE
1 2 3 4 5 6 7 1 2 3 4 5 6 7
PERFORMANCE QUALITY
1 2 3 4 5 6 7 1 2 3 4 5 6 7
1 2 3 4 5 6 7 QUALITY DEPENDABILITY
1 2 3 4 5 6 7
1 2 3 4 5 6 7 DELIVERY TIME 1 2 3 4 5 6 7
DELIVERY DEPENDABILITY
1 2 3 4 5 6 7 1 2 3 4 5 6 7
AFTER SALES SERVICE
1 2 3 4 5 6 7 1 2 3 4 5 6 7
PRODUCT SUPPORT
1 2 3 4 5 6 7 1 2 3 4 5 6 7
INNOVATIVENESS
1 2 3 4 5 6 7 1 2 3 4 5 6 7
(*) Order Winner (OW), Qualifier (Q) or Non-Issue (NI)
COMPETITIVE PROFILE
For each competitive priority, circle the number on the left-hand scale that indicates the degree of importance to the business unit in
competing in the marketplace over the next 5 years.
On the right-hand scale, circle the number that best describes your business unit’s current competitive strength relative to the competitor
who does it best in your industry. Note that if you circle the same number for two items, it implies that the two items are of approximately
equal importance.

REQUIRED COMPETENCES COMPETITIVE PRIORITIES EXISTING COMPETENCES

IMPORTANCE TYPE DEGREE OF STRENGHT


Very unimportant (*) Much Weaker
Very important Much Stronger

1 2 3 4 5 6 7 OW PRICE 1 2 3 4 5 6 7

1 2 3 4 5 6 7 OQ PRODUCT FLEXIBILITY
1 2 3 4 5 6 7
1 2 3 4 5 6 7 VOLUME FLEXIBILITY 1 2 3 4 5 6 7
1 2 3 4 5 6 7 OW MIX FLEXIBILITY 1 2 3 4 5 6 7
BROAD PRODUCT LINE
1 2 3 4 5 6 7 NI 1 2 3 4 5 6 7

1 2 3 4 5 6 7 OQ PERFORMANCE QUALITY
1 2 3 4 5 6 7
1 2 3 4 5 6 7 OW QUALITY DEPENDABILITY
1 2 3 4 5 6 7
1 2 3 4 5 6 7 DELIVERY TIME 1 2 3 4 5 6 7
DELIVERY DEPENDABILITY
1 2 3 4 5 6 7 1 2 3 4 5 6 7
AFTER SALES SERVICE
1 2 3 4 5 6 7 NI 1 2 3 4 5 6 7
PRODUCT SUPPORT
1 2 3 4 5 6 7 1 2 3 4 5 6 7

1 2 3 4 5 6 7 OW INNOVATIVENESS
1 2 3 4 5 6 7
(*) Order Winner (OW), Qualifier (Q) or Non-Issue (NI)
IDENTIFICATION OF STRATEGIC
MANUFACTURING INITIATIVES (SMI)

EXISTING
COMPETITIVE MANUFACTURING
STRATEGY SYSTEM

REQUIRED EXISTING
MANUFACTURING MANUFACTURING
COMPETENCES COMPETENCES

SMI’S TO BRIDGE THE GAPS


OPERATIONS STRATEGY – DESIGNING
THE OPERATIONS FUNCTION
IDENTIFICATION OF REQUIRED
MANUFACTURING COMPETENCIES
• What has manufacturing to be good at to support
competitive strategy ? (see competitive profile)
• What will be especially difficult ?
• analyse the contradictions and formulate unique answer
• e.g. :
• product flexibility and short delivery time
• short and reliable delivery time and difficult to predict demand
MANUFACTURING COMPETENCIES

Cost Product Volume Mix Product Quality Quality Delivery Delivery After sales Product Innovativen
Choices made related to: flexibility flexibility flexibility range perform. depend. speed depend. service support ess

1. Plants

2. Capacity

3. Equipment

4. Process

5. Span of process

6. Inventories

7. Inventory control

8. Production Planning

9. Human resource policies

10. Organisational structure

11. Management control


ACITIVIDADES A REALIZAR

• Leer el capítulo 2 en lo referente a estrategia de


manufactura y prioridades competitivas del texto de
Jacobs y Chase.

• Para la próxima clase determinar por cada grupo de


trabajo dos empresas ecuatorianas y establecer dos
prioridades competitivas que pueden ser consideradas sus
order winner. La respuesta debe estar argumentada.