Competing with Flexibility Leeds School of Business University of Colorado Boulder, CO 80309-0419

1. Competing with Flexibility Leeds School of Business University of Colorado Boulder, CO 80309-0419 Professor Stephen Lawrence

2. COST- BASED MGMT TIME- FLEX MGMT Sources of Competitive Advantage Low wage rates Scale economies Focused production Flexible production Flexible production Increased Variety Increased innovation Fast Response Time Blackburn, “Time-based competition,’’ in Strategic Manufacturing, Moody (ed), Dow Jones-Irwin, Homewood IL, 1990.

3. Operations Flexibility Flex’i*bil’i*ty: capable and adaptable to change. • Perspective of the producer: • Perspective of the customer:

4. Factors Driving Flexibility Shorter Product Life-Cycles Fragmented Markets Demand Uncertainty Increased New Product Intro’s Unexpected Competitors MarketplaceFactors Need for FLEXIBILITY OperationsFactors Pressures to Reduce Inventories Pressures to Improve Quality Process/Product Simplification Changing Supplier Relationships Smaller Plants/Facilities

5. Wall Street Journal – Mar 04, 02 “[Greenspan] attributed the performance to the economy’s apparent increased flexibility and resilience…” “[The US economy is] benefiting from a new flexibility woven into its fabric over the last decade.

6. Types of Flexibility • Mix Flexibility • Ability to produce a variety of products (goods/services) with the same operational processes. • Changeover Flexibility • Ability to rapidly change over equipment and technology for a variety of products • Modification Flexibility • Ability to implement rapid design changes; customize standard products to meet customer requirement

7. Types of Flexibility • Volume Flexibility • Ability to adapt quickly and easily to changing demand patterns and volumes • Rerouting/Program Flexibility • Ability to create products and add value in using alternative methods, routings, techniques. • Resource Flexibility • Ability to handle variations in input resources (e.g., raw materials) and to use alternative resources

8. Strategic Flexibility

9. Pitfalls of Flexibility • Focus vs. flexibility • Specialists vs. generalists • Cost/flexibility trade-offs • Flexibility for whom and what? • When does the market reward flexibility? • Customization/responsiveness squeeze

10. Addressing the Squeeze • Analyze Customer Expectations about Flexibility • what are the benefits to the customer? • what is the customer willing to pay for? • will customers be willing to wait • would customers be willing to settle for “controlled” customization? • Assess Capabilities of the Firm • amount of excess capacity • cost and feasibility of carrying more inventory and/or personnel • current and potential technologies • cost/feasibility of changing point of product differentiation • feasibility of improving supply delivery • methods of collapsing cycle-times in value chain

11. Inducing Flexibility • Alter design of operations (process) • single vs. multiple steps • focused layouts • general purpose equipment • assemble to order (vs. make to order/stock) • Alter design of product • design for manufacturability • shared parts and components • personnel with broad training • information technology to assist • cross-functional design teams • Manage demand • improved forecasts • yield management

12. Inducing Flexibility • Manage supply • alter purchase contracts for quick delivery • bring long lead-time items in-house • process in smaller batches • Use slack resources • yield management (induce demand) • multi-tasking of employees/personnel • Operate to forecast • improve forecast • determine service level • staff / produce to meet service level • hold intermediate stock / supplies