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Manufacturing Strategy. Strategy - a careful plan or method (Merriam-Webster dictionary) Company strategy is the plan of where the company is headed, or it’s approach to success (increasing shareholder value).

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manufacturing strategy
Manufacturing Strategy

Strategy - a careful plan or method (Merriam-Webster dictionary)

Company strategy is the plan of where the company is headed, or it’s 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.

manufacturing strategy2
Manufacturing Strategy

Dimensions of Manufacturing Strategy

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

Customer Markets and Distribution

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

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Manufacturing Strategy

Level of Flexibility – the ease and extent to which a facility can adapt to change

  • volume flexibility
  • expansion flexibility
  • product flexibility
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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

manufacturing strategy9
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

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Manufacturing Strategy

Make–to-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
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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