STRATEGY and COMPETITION Universiti Teknikal Malaysia Melaka (UTeM) Production Planning and Control Haeryip Sihombing Universiti Teknikal Malaysia Melaka (UTeM) 1 BMFP 4513

Topic Areas of PPC Course Aggregate Planning Scheduling Supply Chain Simulation Lean production Management of Information System Prerequisite topics: Forecasting

Functional Areas of the Firm Operations (product design, manufacturing, product quality, process efficiency, customer service, inventory management…) Finance (views manufacturing management as portfolio management  risk reduced by diversification, by 1969, 70% of largest firms has no dominant business) Marketing (often conservative product analysis, imitative/innovative, IBM & Xerox)

What is Strategy ? Strategy is a common vision that unites an organization, provides consistency in decisions, and keeps the organization moving in the right direction

Time Horizons for Strategic Decisions 1. Long Term Decisions ( > year)  Strategic decision Locating and Sizing New Facilities Finding New Markets for Products Mission Statement: meeting quality objectives 2. Intermediate Term Decisions (weeks or month) Forecasting Product Demand Determining Manpower Needs Setting Channels of Distribution Equipment Purchases and Maintenance 3. Short Term Decisions (hours or days)  Tactical decision Purchasing Shift Scheduling and Maintenance Inventory Control

The Elements of Strategy

Decision Horizons of Manufacturing Strategy

History of Production and OM Major Thrust of the Industrial Revolution 1850-1890 Factories tended to be small. Boss had total control. Little regard for workers safety or workers rights. Production Manager Position. 1890-1920. Frederick Taylor champions the idea of “scientific management”. As complexity grows specializations take hold. Inventory Control Manager Purchasing Manager Scheduling Supervisor Quality Control Manager etc.

GLOBALIZATION COMPETITION Global competition is heating up to an unprecedented degree. It appears that several factors favor the success of some industries in some countries For example: Germany: printing presses, luxury cars, chemicals Switzerland: pharmaceuticals, chocolate Sweden: heavy trucks, mining equipment United States: personal computers, software, entertainment Japan: automobiles, consumer electronics

Porter’s Thesis Famed management guru, Michael Porter, has developed a theory to explain the determinants of national competitive advantage. These include: Factor Conditions (Land, Labor,Capital, etc.) Demand Conditions (local marketplace may be more sophisticated/demanding than world marketplace) Related and Supporting Industries Firm Strategy, structure, rivalry (e.g.: Germans are strong technically, Italian family structure, Japanese management methods)

Time-Based Competition “Time-based competitors focus on the bigger picture, on the entire value-delivery system. They attempt to transform an entire organization into one focused on the total time required to deliver a product or service. Their goal is not to devise the best way to perform a task, but to either eliminate the task altogether or perform it in parallel with other talks so that over-all system response time is reduced. Becoming a time-based competitor requires making revolutionary changes in the ways that processes are organized” (Blackburn(1991). Being not only the first to market but the first to volume production as well gives a firm a decided advantage.

How Do Firms Differentiate Themselves from Competitors? Low Cost Leaders: Some examples include WalMart and Costco in Retailing Korean automakers (Hyundai, Kia, etc.) e machines personal computers High Quality (and price) Leaders. Ex: Mercedes Benz automobiles Rolex Watches (some firms do both: Chevrolet and Cadillac)

Understand Tradeoffs Example: Made-to-Order Pizza Fresh, Natural Ingredients Toppings & Crust Choice Slow to Cook Expensive Ingredients Low Volume Ovens QUALITY QUALITY & DESIGN FLEXIBILITY VOLUME FLEXIBILITY TIME COST

Some Dimensions of Competition Re-engineering of the Business Process Streamlining process JIT Deliveries Cutting waste Time-based competition Shortening time to delivery Competing on Quality

Business Process Re-engineering The process of taking a cold hard look at the way that things are done. Term coined by Hammer and Champy in their 1993 book. Classic Example: IBM Credit Corporation. The process had been broken down to a series of multiple steps, each having substantial delays. Approval required from 6 days to 2 weeks. The process was re-engineered so that a single specialist would handle a request from beginning to end. The result was that turnaround time was slashed to an average of 4 hours!

Just-In-Time JIT is a production control system that grew out of Toyota’s kanban system. It is a philosophy of production control (also know as lean production) that attempts to reduce inventories to an absolute minimum. It has become pretty much a standard way of thinking in many industries (especially the automobile.) We will discuss JIT and its relationship to MRP in next session course.

The Product Life-Cycle Curve

The Product/Process Matrix

So you have an idea what others do … and you have a business idea…

OPERATION AS A SYSTEM

DECISION MAKING

A Framework for Manufacturing Strategy Customer Needs New and Current Products Performance Priorities and Requirements Quality, Dependability, Speed, Flexibility, and Price Operations & Supplier Capabilities Technology People Systems R&D CIM JIT TQM Distribution Support Platforms Financial Management Human Resource Management Information Management Enterprise Capabilities Strategic Vision

PRODUCTION SYSTEM

CAPACITY Level of capacity Size of capacity changes Handling excess demand Hiring/firing workers Need for new facilities

FACILITIES Best size for facility Large or small facilities Facility focus Facility location

HUMAN RESOURCES Skill levels required Degree of autonomy Policies Profit sharing Individual or team work Type of supervision Levels of management Training

QUALITY Target level Measurement Employee involvement Training Systems needed to ensure quality Maintaining quality awareness Evaluating quality efforts Determining customer perceptions

SOURCING Degree of vertical integration Supplier selection Supplier relationship Supplier quality Supplier cooperation

OPERATIONS PRIORITIES Cost Quality Delivery Flexibility Delivery Speed Delivery Reliability Coping with Changes in Demand Flexibility and New Product Introduction Speed

The TRANSFORMATION PROCESS

MANAGEMENT IN e-BUSINESS

TYPES OF B2B TRANSACTIONS

GLOBALIZED THE BUSINESS

COMPETITION

STRATEGIC DECISIONS IN OPERATIONS

Example : WAL-MART

Product Vs. Process Vs. Technology

Matrix

ISSUES and TRENDS

The END