Manufacturing Strategy Operations Saad Ahmed Javed National College

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

Supplier Manufacturing Plant DC DC DC

Supplier Mfg Plant DC DC

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

Vertical Integration Where on The Continuum ? Assembly Only Vertically Integrated

Raw Material Parts Components Sub-assemblies Modules Final Assemblies

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 1 P L 2 A N 3 T S 4 PRODUCTS B C X X D E F X X X

Manufacturing Strategy • Capacity • Centralization • Vertical integration • Scope / focus