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Configuration of Elements. ENVIRONMENT. STRUCTURE. MANUFACTURING STRATEGY. COMPETITIVE STRATEGY. PERFORMANCE. Manufacturing Strategy Model. Manufacturing Strategy. Process technology Capacity Quality systems Production/inventory control Workforce Management

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Configuration of elements
Configuration of Elements








Manufacturing strategy model
Manufacturing Strategy Model

Manufacturing Strategy

  • Process technology

  • Capacity

  • Quality systems

  • Production/inventory control

  • Workforce Management

  • Manufacturing Organization

  • Cost

  • Quality

  • Delivery time

  • Flexibility

Strategic configurations
Strategic Configurations

  • Configurations are a tightly linked set of four elements

  • No causation is implied among the elements

  • Start with consideration of competitive strategy

  • Alignment among elements is essential to optimal performance

  • Manufacturing strategy is of special interest to us

Manufacturing capabilities
Manufacturing Capabilities

  • Some manufacturing capabilities are better suited to particular configurations

  • Manufacturing capabilities take time to develop

  • Flexibility is an important capability especially if it permits firms to transcend tradeoffs between cost, quality, and delivery time

  • Customers don’t experience flexibility directly, but they experience its consequences

  • Flexibility can be achieved through technological or organizational innovation

Configuration 1 niche differentiator
Configuration #1 – Niche Differentiator

  • What is the strategy?

  • Pursue segments that are”underserved” by broad differentiators or cost leaders

  • Make high value-added products, sometimes bundled with services

  • Maximize gross margins - Don’t compete on price

  • Respond nimbly to opportunities that other larger companies miss

  • Segments may be too small or stable to interest larger firms

Configuration 1 continued
Configuration #1 (Continued)

  • Environment

  • Pursue narrow segments (by customer, product technology or locale).

  • Who is willing to pay more for what you have to offer?

  • Segments change often because of fashions

  • Structure

  • Simple

  • Top organized by functions

  • Few levels of technical specialists

  • Lots of highly skilled workers

What manufacturing capabilities match configuration 1
What Manufacturing Capabilities Match Configuration #1?

  • Achieve flexibility by technology or people?

  • General purpose equipment

  • Labor intensive skilled workers (motivated, multi-skilled, autonomous, well paid)

  • Focused facilities - short runs only

  • Inventory tends to be high despite desire to avoid it in a volatile environment

  • Outsource - use JIT

  • How to develop relationships when firm is a small buyer for your suppliers

Configuration 2 broad differentiator
Configuration #2 Broad Differentiator

  • What is the competitive Strategy?

  • Offer a wide range of products to a variety of markets

  • Compete on quality and service, brand – not price).

  • Grow by entering new markets and developing new products

  • Deal with competition from niche differentiators (low volume customized) and cost leaders (high volume low cost)

Configuration 2 continued
Configuration #2 (Continued)

  • Environment

  • Complex and heterogeneous

  • Structure

  • Decentralized around product/market units (businesses, divisions)

  • Best to coordinate between self-contained units, but liaisons and cross-functional teams help

  • Got to have lots of specialized engineers and marketers to develop new markets

What manufacturing capabilities match configuration 2
What Manufacturing Capabilities Match Configuration #2

  • Complexity and confusion are the enemy

  • Multiple products at different life cycle stages

  • What kind of plants and equipment should you have for both emerging and mature products

  • Capacity dynamics are challenging (“insufficient capacity” means the wrong kind of capacity).

  • Reallocation of resources is frequent but tougher to do with centralization

  • Diseconomies of scale develop from confusion of multiple flows

Configuration 3 cost leaders
Configuration #3 – Cost Leaders

  • What is the strategy?

  • Compete on the basis of low cost

  • Rely on economies of scale

  • Low margins, but make money on volume

  • Focus on high volume stable, mature markets

Configuration 3 continued
Configuration #3 (Continued)

  • Environment

  • Stable environment (required because of large investment in specialized capital)

  • Structure

  • Large, centralized and bureaucratic

  • Lots of skilled specialists, but few skilled workers

  • Manufacturing Capability

  • Standardization around a dominant design

  • Capacity additions tend to be large and lumpy

  • Rely on vertical integration for economies but less so now

Configuration 4 lean competitor
Configuration #4 - Lean Competitor

  • This is not a separate strategy but a capability solution for broad differentiators

  • Could differentiate by brand or service or we can transcend old tradeoffs with lean manufacturing

  • Can we transcend?

  • Porter says no. You will get “stuck in the middle”

  • Cost versus quality?

  • Quality versus delivery?

  • Cost versus delivery?

Lean innovative practices
Lean Innovative Practices

  • Just-in-time

  • Continuous improvement

  • Simultaneous engineering

  • Autonomous teams

  • Outsourcing and alliances

Ge dishwasher plant
GE Dishwasher Plant

  • Product innovation (plastic tub and door assemblies). Cost was initially higher

  • Proceed sequentially

  • Product/process design

  • Cost/Quality (economies of scale, worker training)

  • Flexibility (AMT)