Manufacturing Strategy
 - Part 1: Setting the strategy

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Introduction

Do any of these sound familiar and have you heard the same sort of thing in your company:

'I can sell it but they can't make it'

'It's no use telling me you can make doors this week, we need windows.'

'I've got this order now so you will deliver next week.'

'Production output is down this week yet orders are stacking up.'

'What do you mean we don't have the equipment to produce it?'

'Of course I want it NOW!'

Statements such as these really show that something is wrong somewhere and that you need a manufacturing strategy. A real problem is that you cannot buy a manufacturing strategy off the shelf. You must create it, work on it, develop it and make it become part of your business. It is a vital part of the business and as such can only come from within.

The format of this series on developing a manufacturing strategy is a combination of asking questions and prompting some questions to ask. The answers will be different for every fabricator. There can be no right or wrong answers, only appropriate answers to appropriate questions.

We are all facing severe competition and changing market requirements and in addition to our existing local competitors we have new competitors or expanding national ones. The market demand is also changing from a retail base to a specifier or contract base thereby putting margins under severe pressure. Gone are the good old days and the hard new days are already on us. You need to act now before it is too late!

But before trying to create manufacturing strategy we should possibly define what it is not.

Despite these statements manufacturing strategy can be about all of these things but only if they are appropriate to your business.

Strategy - Tactics - Operations

Let us begin with some basic ideas and definitions of strategy, tactics and operations.

Figure 1: The Strategy Limits

The relationship between strategy and tactics.

In a military sense, strategy is the effort to bring your forces into play advantageously and occurs before the combatants meet. Tactics is what happens once the battle begins and operations are how the individual units perform.

A wonderful strategy can be ruined by losing tactics. This is equivalent to setting your boxing opponent up for a knockout punch and then missing the punch.
Most companies accept the need to develop 'sales strategies' or 'marketing strategies' but see no need to develop a complementary strategy for manufacturing. Without this manufacturing strategy any investment in machinery, systems or technology is probably a series of unrelated knee-jerk responses to current operational problems. Who has got machinery that they bought for the 'big order' that never appeared?'

We are often unaware that what appears to be a routine manufacturing decision is binding us into equipment, personnel or systems which will make it difficult and costly to adapt the business to the changing market requirements. Worse still, having invested in an inappropriate system you may not be able to re-invest or even have the time available to do so.

It is obvious that the manufacturing strategy must be integrated into the overall business strategy alongside the marketing, finance, sales and other strategies.
For too long the manufacturing area has been thought of as a 'liability' in terms of the overall business strategy and this has led to comments like those al the start of this article. By integrating manufacturing into the overall business strategy the more forward thinking companies can transform manufacturing into an asset.
This approach requires that all production managers become pro-active in terms of' the business rather than reactive. For too long we have seen our role as responding to external demands - producing what the technical department designed in the volumes sold by sales without influencing either. Production managers must begin to think of themselves as businessmen!

The business strategy must take into account manufacturing capabilities as well as market needs and product design. Production management must become actively involved in the development of the overall business strategy. Improving manufacturing performance gives companies a competitive edge and to achieve this production managers must begin to think and act in a strategic manner. We have to learn how to manage our activities strategically so that the manufacturing function is able to give the company the competitive edge in the market place.

We will come back to this point later in the series when we examine the implication in greater detail but at this stage we need to understand that we are talking about a whole new ball game here. Minor improvements will not get you through the survival stakes at this stage. Remember that in the future, excellence will only be a ticket to the game.

Business strategy

Before we can set down a manufacturing strategy we must have some idea of the overall business strategy after all this is the framework that manufacturing fits into. A business strategy needs to he formed in several steps where you need to go 'around the loop' several time to ensure that it all fits together.

Figure 2: The Business Strategy Framework

We must first define the business objectives, because these are what give the essential direction arid motivation for all the other work. They provide the boundaries for all the other objectives.

The objectives may be:

There should always be actual targets to aim for in both the long and short term. It is not enough to say that you want to increase profit, you must state how much you want to increase it by and over what period i.e. profit to increase from £1,000 to £2,000 in the next twelve months. The objectives should be bold (to provide a challenge), measurable (to see if you get there), prioritised (to give focus) and accepted by all staff.

Under no circumstances should these exceed half a page in length, nor should you have more than four key objectives.

Marketing strategy

This involves looking at your market in terms of size, volume and trends, looking at customers in terms of characteristics and needs and competitors in terms of strengths and weaknesses. The most memorable method is to think in terms of S.W.O.T. (Strengths, Weaknesses, Opportunities arid Threats). The end result is a series of identified markets, targets for these markets and actions to open up new markets.

Figure 3: The SWOT grid

The choice of marketing strategy influences toe manufacturing strategy but it is also true that the manufacturing process influences the marketing strategy.
Whilst this may seem as if we is going around in circles you need to know and realise the interrelationship between the two strategies.

The key factors for success (KFS)

'These are the factors that determine growth and success in your particular market. The KFS may be product related or system related e.g.

Every company needs to find out what the KFS are for their market and to try to improve these. If there is nothing to distinguish you from the crowd then your future is limited.

Manufacturing strategy

Having established the objectives, marketing strategy and KFS we can begin to develop a manufacturing strategy to deliver the key factors for success at the required level. The formulation of the marketing and other strategies must be clearly understood by the engineers otherwise the design of the manufacturing systems will not be effective.

It used to be assumed that cost-efficiency based on high machine and labour utilisation was the way to be competitive. The market and battleground have changed so that now total system effectiveness is the vital factor.

The new KFS are based around customer responsiveness and relate to factors such as:

A major point in the strategy is the product itself and we need to achieve the following:

Figure 4: What we need to achieve

This helps us to set our priorities in terms of the development of a strategy. A strategy to achieve all of the possible combinations of the above diagram would be a truly potent weapon in the market place.

In our development of this weapon we will need to examine how we control production, how we control quality and how we measure our performance in all areas. Some of the areas will require investment in hardware but most of the gains we want can be achieved by improving the methods we use.

We must always be prepared to try new ideas and to challenge the traditions that have built up in our factories. Almost all new ideas will work given time, dedication and application. The real problem is the 'idea or technique of the week' which is not applied properly and is blamed for the failure when really it was implementation that failed - not the idea or technique itself. Despite this you must however beware of 'experts' bearing the solution to all your problems in one easy bag of tricks. This is like handling someone a screwdriver and some wire strippers and then calling him an 'electrical engineer'. The real experts still have a bag of tools but they are made appropriate to your needs.

If you ask questions (better still the right questions) then you will be well on the way. In the final analysis only you can choose your tools, your weapons and your strategy and work to make them appropriate.

What can we achieve?

It is important to set some overall goals in terms of what we want to achieve from our manufacturing strategy, let's start with some big ones:

  1. We want to reduce stock, work in progress and cash tied up in product by at least 40%.
  2. We want to reduce lead times from order to delivery by a factor of 10 i.e. from 6 weeks to 3 days.
  3. We want to increase lead-time reliability by a factor of at least 3.
  4. We want to increase quality by a factor of at least 4.
  5. We want to increase overall profitability of the company by at least 20%.

These are achievable goals!

"The Manufacturing Strategy" Series

"The Manufacturing Strategy" series is designed to give production managers and their staff some insights into new manufacturing methods and to prompt the industry into considering the benefits of alternative approaches to manufacturing. The series is:

Part 1: Setting the strategy (This section)

Part 2: The systems and MRP II

Part 3: Just in time (1) 

Part 4: Just in time (2) 

Part 5: Just in time (3) 

Part 6: Optimised Production Technology (OPT)

Part 7: A fundamental quality

Part 8: Quality management techniques & tools

Part 9: ‘There's no accounting for manufacturing strategy’

Part 10: Performance measurement

Part 11: Changing roles and things to do NOW!

 

Last edited: 11/03/10

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