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Capacity & Centralization in Manufacturing Strategy: Optimization Techniques

Explore capacity management strategies like aggregate level and deployment in manufacturing operations for improved efficiency. Learn about centralization benefits, vertical integration, and focusing on bottlenecks for competitive advantage.

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Capacity & Centralization in Manufacturing Strategy: Optimization Techniques

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  1. Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

  2. Manufacturing Strategy & Competativeness Ch 3 (Part-II)

  3. Manufacturing Strategy • Capacity • Level • Deployment • Centralization • Vertical integration • Scope / focus

  4. Capacity • Aggregate level • Deployment • By product & part • By process • By geography

  5. Aggregate CapacityDemand Variation

  6. Capacity Utilization • Target 85-90% utilization • Long-run : • Prudently add anticipatory capacity : within existing facitliies, then new • Avoid adding costly “last chunk” • Short-run : • Use excess capacity to build inventory for high demand periods • Add overtiime to boost capacity when req’d Can run > 100% for brief periods • Focus on bottlenecks (CCRs)

  7. Centralization / Decentralization

  8. Supplier Supplier Supplier Manufacturing Plant DC DC DC

  9. Mfg Plant Mfg Plant Supplier Supplier Supplier DC DC DC

  10. Manufacturing Strategy • Centralized • Leverages fixed costs & investment • Consistent quality contol • Simplified supply chain • Decentralized • Closer to market • More manageable Scale determines range of affordable options

  11. Vertical Integration

  12. Where on The Continuum ? Assembly Only Vertically Integrated Vertical Integration

  13. Raw Material Parts Components Sub-assemblies Modules Final Assemblies

  14. Vertical Integration Drivers • Availablity • Scale economies • Learning curve • Control

  15. Factory Orientation • Broad line factories • Scale & scope economies • Flexible capacity • Focused factories • Narrow product scope • Common parts & processes • Often “full products” • “Plants within plants”

  16. Focused Factories PRODUCTS A B C D E F X 1 P L A N T S X X 2 X X 3 X X 4

  17. Manufacturing Strategy • Capacity • Centralization • Vertical integration • Scope / focus

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