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

Manufacturing Strategy & Competativeness Ch 3 (Part-II)

Manufacturing Strategy Capacity – Level – Deployment Centralization Vertical integration Scope / focus

Capacity Aggregate level Deployment – By product & part – By process – By geography

Aggregate Capacity Demand Variation

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)

Centralization / Decentralization

Manufacturing Plant Supplier DC

Mfg Plant Supplier DC Mfg Plant

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

Vertical Integration

Assembly Only Vertically Integrated Where on The Continuum ? Vertical Integration

Raw Material Parts Sub-assemblies Components Final Assemblies Modules

Vertical Integration Drivers Availablity Scale economies Learning curve Control

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

Focused Factories A B C D E F PRODUCTS PLANTSPLANTS X XX X XX X

Manufacturing Strategy Capacity Centralization Vertical integration Scope / focus