Jump to first page JPdeL and Associates, 2001, 2002, copyright 2001 1 Manufacturing Capabilities and...

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JPdeL and Associates, 2001, 2002, copyright 2001

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Manufacturing Capabilitiesand

Competitive Advantage

Dr. Jesus A. Ponce-de-LeonJanuary 2002

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A recent global manufacturing survey undertook by Industry Week revealed that the top 50 global firms utilize the following programs:

Predictive / preventive maintenance 46.3%Cellular manufacturing 41.2%Focused factory production systems 31.3%JIT 30.8%Quick changeover techniques 27.8%Lot size reductions 26.0%Pull system Kanban 22%Bottleneck constraint removal 19.6%

Global manufacturing surveyGlobal manufacturing survey

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These plants report performance levels of:

Finished product first pass yield 95%Scrap/rework as % of sales 2.0%Warranty costs as % of sales 1.0%Typical manufacturing cycle time 29 hrsStandard customer-order lead time 14 daysOn-time delivery rate 95%Annual raw material turns 10.1 turnsAnnual WIP inventory turns 13.0 turnsAnnual finished goods inventory turns 12.0 turnsProductivity (sales usd/employee) $150,000

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Situation

• Your business has already tried the fancy programs:

reengineeringmanufacturing cellsJITTQMsubcontractingcontinuous improvementslean manufacturingERP (such as SAP software)

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Worldwide we are observing that leading edge

manufacturing firms are reaching apparent limits

to improvements from lean manufacturing techniques.

Worldwide we are observing that leading edge

manufacturing firms are reaching apparent limits

to improvements from lean manufacturing techniques.

Limits to Improvements?Limits to Improvements?

These observations suggest a life cycle for lean

manufacturing has been reached. That suggests

a start up (up-hill stage), a growth and diffusion

stage, a maturity stage and then an apparent

decreasing benefits stage.

These observations suggest a life cycle for lean

manufacturing has been reached. That suggests

a start up (up-hill stage), a growth and diffusion

stage, a maturity stage and then an apparent

decreasing benefits stage.

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Sales

Number ofproducts

time

Fabricationand distributioncosts

The success stage

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Situation TodaySituation Today

• Sales have stopped growing.

• Your costs do not seem to improve anymore.

• Your products do not seem to be leading edge in the market anymore.

• Your organization is having difficulty coordinating among marketing and production and research & development.

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• So, you ask, why is that my operations do not seem to improve?

• Why my costs do not seem to fall?

• Why my improvement programs do not produce anymore dramatic results?

• Why in spite of the marketing and sales efforts our profits do not seem to get any better?

WHY?

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Before we proceed to answer these questions

we need to make a short conceptual trip.

1. Let us first understand how some

manufacturing global success came about.

2. And then look at why these

manufacturing strategies

seemed to have reached their limits

for improvements.

2. And then look at why these

manufacturing strategies

seemed to have reached their limits

for improvements.

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Part I

How some manufacturing firmsSucceeded in global markets

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DEVELOPING MANUFACTURING CAPABILITIES

• FOR DECADES MANUFACTURING WAS NOT SEEN AS STRATEGIC.

• EARLY 80s MANUFACTURING AS A COMPETITIVE WEAPON (SKINNER, 1985)

• RESEARCH BY FERDOWS ET AL; HALL-NAKANE; WHYBARK AND OTHERS FOUND

JAPANESE SEEMED TO HAVE FOLLOWED A MANUFACTURING MODEL THAT IS SOLID AND LASTING.

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TWO DIFFERENT STARTING POINTS FOR MANUFACTURING PARADIGMS

JAPANESE SAW QUALITY AS CRITICAL TO BE AN INTERNATIONAL PLAYER.

AMERICANS SOUGHT ECONOMIES OF SCALE , SCOPE AND EXPERIENCE EFFECTS.

THESE DIFFERENT VIEWS STEERED THEM IN TWO DIFFERENT MANUFACTURING PATHS

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Two worldwide studies of global companies

by academics and consulting firms found that

the most successful path has been a build up

of one competency on top of another in a

Logical and predefined sequence. This is

known as the cumulative capabilities model.

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ManufacturingCapabilities

FerdowsEt al 1986

Hall andNakane, 1990

Ferdows &DeMeyer1990

Noble &Schmenner1992

Roth &Marucheck1992

Quality

Dependability

DeliveryReliability

Speed

CustomerRelationships

New productintroductions

Low costefficiency

Flexibility

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Manufacturing capabilities studies

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QUALITY

DEPENDABILITY

SPEED

FLEXIBILITY

TIME

EFFOR

T

CUMULATIVE MANUFACTURING CAPABILITIES

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QualityQuality

DependabilityDependability

SpeedSpeed

FlexibilityFlexibility

AutomationMulti skilledworkers

ProductionProgrammingand forecasts

Suppliers

Automation

Factorydesign

EliminationOf time wastes

Productdesign

Maintenanceprogram

Suppliers

Productionscheduling

Top managementand employee attitudes

Elimination ofSources ofvariation

OrganizationWide but focusedeffort

Building ManufacturingWorld Class CapabilitiesBuilding ManufacturingWorld Class Capabilities

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Part II

Why world class programs reachapparent limits for improvement

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Sales

Number ofproducts

time

Fabricationand distributioncosts

The symptoms of product proliferation

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QualityQuality

DependabilityDependability

SpeedSpeed

FlexibilityFlexibility

AutomationMulti skilledworkers

ProductionProgrammingand forecasts

Suppliers

Automation

Factorydesign

EliminationOf time wastes

Productdesign

Maintenanceprogram

Suppliers

Productionscheduling

Top managementand employee attitudes

Elimination ofSources ofvariation

OrganizationWide but focusedeffort

Building ManufacturingWorld Class CapabilitiesBuilding ManufacturingWorld Class Capabilities

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Some new productsbecome successfulSome new productsbecome successful

Sales increasesencouraging newProduct variations


Costs of production go up. Trigger need forprocess improvements.

Costs of production go up. Trigger need forprocess improvements.

Pressure to get new salesto overcome rising costs.Pressure to get new salesto overcome rising costs.

Marketing and sales broadenproduct scope and begin to sell to all kinds of markets.


Product variationsproliferate withouta common or plannedplatform.


Product Proliferation Cycle

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Costs of production go up. Trigger need forproduct improvementsto existing products.

Costs of production go up. Trigger need forproduct improvementsto existing products.

Pressure to get new salesto overcome rising costs.Pressure to get new salesto overcome rising costs.





Lacking new successfulProducts and lacking innovation

Lacking new successfulProducts and lacking innovation

Proliferation of variations onExisting product portfolio

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• The world class programs have not failed.

• What has failed is a business’s attention to the problems created by the growth and proliferation of products and product variations.

• Product proliferation slowly but surely increases complexity in all manufacturing related functions.

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Complex Product Portfolio

• Grows as a collection of uncoordinated designs, variations, materials used, processes, and manufacturing flow required to produce them.

• Creating complexity in scheduling production planning and managing materials requirements.

• Difficulty to plan and manage inventories in spite of JIT, cells, and lean stategies.

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Complex Product Portfolio

• Slowly increases organizational complexity.

• Difficult coordination between marketing and production and R&D.

• Excessive product development programs.

• Increasing difficulty to track real costs per product or product family due to product fragmentation.

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Part III

Strategic Actions to Re-establishManufacturing leadership

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Strategic Manufacturing Actions:

I. Time to redesign whole set of product lines and their variations.

II. Identify new product platforms to simplify and rationalize entire product portfolio.

III. Redesign plants moving freezing point in accordance to new product designs.

IV. Take into account customer preferences and market trends.

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Product 1Product 2Product 3Product 4Product 4Product 5Product 6Product 7Product 8Product 9Product 10Product 11Product 12Product 13Product 14Product 15Product 16Product 17Product 18Product 19Product 20

Market Segments

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Product-Market Mapping

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Product redesign strategies

1. Tear apart to analyze each part and subsystem2. Eliminate parts or subsystems3. Simplify4. Combine5. Reconfigure6. Automate7. Reuse8. Substitute

Keep function and customer preferences in mindTo redesign and reconfigure.

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Analyze market segmentsBenefits, functionalityTo be addressed by re-Designed products

Analyze market segmentsBenefits, functionalityTo be addressed by re-Designed products

Identify new, fewer butPowerful product

platforms

Identify new, fewer butPowerful product

platforms

Renewed productPortfolio with fewerVariations but servingMore market needs

Renewed productPortfolio with fewerVariations but servingMore market needs

Proceed to redesignManufacturing processesAnd entire plants, acquireNew core skills, orTechnologies if necessary

Proceed to redesignManufacturing processesAnd entire plants, acquireNew core skills, orTechnologies if necessary

Product modularityAnd subsystemsdesigns

Product modularityAnd subsystemsdesigns

Global Redesign Strategic Map

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End of Presentation

January 2002

Jump to first page JPdeL and Associates, 2001, 2002, copyright 2001 1 Manufacturing Capabilities and...

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