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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).

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Manufacturing Strategy

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  1. 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.

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

  3. 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

  4. 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

  5. Manufacturing Strategy Customer Markets and Distribution • Geographic location • Market segment • Automotive (Chevrolet, Pontiac, Buick, Cadillac) • Clothing (Eddie Bauer, Gap, Old Navy, Talbots)

  6. 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).

  7. Manufacturing Strategy Level of Flexibility – the ease and extent to which a facility can adapt to change • volume flexibility • expansion flexibility • product flexibility

  8. 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

  9. 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

  10. 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

  11. 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

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