5.

0 Order-winners And Qualifiers

5.1 Order Winners & Qualifiers

5.2 Order Winners Versus Qualifiers
5.3 Specific Dimensions
ASSOC.PROF.TS.DR. EFFENDI MOHAMAD
FACULTY OF MFG ENGINEERING
UTeM

1
Understanding of market

▪ Formulation of successful strategies requires clear

understanding and agreement on:-
• The market in which a company wishes to be in
today,…and tomorrow…
• Past markets typically characterized by similarity
and stability
• Current markets characterized by difference and
change
• Order winners and qualifiers, and their relative
weightings, are central in defining these
2
 Strategic Integration (T Hill Framework)

Company Marketing How orders Manufacturing Strategy

objective objective Are won Process Infrastructure
Choice

3
ESTABLISHING THE ORDER WINNERS AND QUALIFIERS

1. Marketing review the company’s markets in terms of the way it

perceives market segments

2. For each segment, products and/or customers are selected which

represent that segment

3. Sales volumes are prepared for current and for an appropriate planning
time horizon (normally two time periods in the future)

4. Marketing select and weight relevant order winners and qualifiers for
each representative product or customer within both the current and
chosen future time periods.

4
ORDER WINNERS AND QUALIFIERS – Refinement (details)

1. Marketing’s opinion is challenged by

• The opinion of other functions

• The data collected to test the relative importance of chosen order

winners

2. From this, initial perceptions are appropriately modified as

part of a continuing strategy .debate

5
5.1 Order Winners & Qualifiers

▪ Some order-winning criteria do not fall within the jurisdiction) of

manufacturing.

▪ For example, after-sales services being the customer supplier,

technical liaison capability, brand name, design leadership are
features provided by functions other than manufacturing. It is a
corporate decision, therefore, whether or not to allocate resources to
provide one or more of these particular features.

▪ However, within the mix of order winners over a products life cycle,
manufacturing related criteria will normally be most important.

6
• Qualifiers are those criteria that a company must meet for a
customer to even consider it as a possible supplier.

• For example, customers increasingly require suppliers to be registered

under ISO 9000 series. Suppliers, therefore, who are so registered have
only achieves the right to bid or be considered.

• Further more, they will need to retain the qualification in order to stay
on the short list or be considered as a competitor in a given market.
However, providing or attaining these criteria do not win the orders.

• Order-winners are those criteria that win the order.

7
5.2 Order Winners Versus Qualifiers

• The need to identify difference is further underscored by

recognizing the essential difference between these two
dimensions in a market.

• To provide qualifiers, companies need only to be as good as

competitors to provide order winners, they need to be better than
competitors. However, qualifiers are not less important than order
winners they are different.

• Both are essential if companies are to maintain existing share and

grow.

8
• The need to distinguish between those criteria that win orders in the
marketplace and those that qualify the product to be there is
highlighted in the following example. When Japanese companies
entered the color television market, they changed the way in which
products won orders from predominantly price to product quality
and reliability in service.

• The relatively low product quality and reliability in service of existing

television sets meant that in the changed competitive forces of this
market, existing procedures were losing orders through quality to the
Japanese companies; that is, existing manufacturers were not
providing the criteria that qualified them to be in the marketplace.

9
• By the early 1980s, manufacturers that lost orders raised product
quality so that they were again qualified to be in the market.

• As a result, the most important order-winning criterion in this market

has reverted back to price.

• Manufacturing, therefore, must provide the qualifying criteria to get

into or stay in the marketplace. But these alone will not win orders.
They merely prevent a company from losing orders to its competitors.

• Once the qualifying have been achieved, manufacturing then has

to turn its attention to the ways in which orders are won and ideally to
provide these better than anyone else.

10
• Also, if price is not the predominant order-winner, it does not mean
that a company can charge what it wishes. Although it needs to
recognize that it does not compete on price and therefore should
exploit this opportunity, it has to keep its exploitation within sensible
bounds.

• Failure to do so will result in the company losing orders increasingly to

those who are more competitively priced. Hence, in this situation a
company will have turned a qualifying criterion (i.e., a product highly
priced within some limits) into an order-losing criterion where the
price has become too high.

11
5.3 Specific Dimensions

1. MANUFACTURING RELATED AND MANUFACTURING SPECIFIC

CRITERIA

2. MANUFACTURING RELATED BUT NOT MANUFACTURING

SPECIFIC CRITERIA

3. NON MANUFACTURING CRITERIA

12
1.MANUFACTURING RELATED AND MANUFACTURING SPECIFIC
CRITERIA

a. Cost
b. Quality
c. Delivery time and delivery time reliability
d. Flexibility and Innovativeness

2. MANUFACTURING RELATED BUT NOT MANUFACTURING

SPECIFIC CRITERIA
a. Product design
b. Demand management
c. Capacity planning
d. Inventory management
e. Shop floor management systems
f. Quality management
g. Distribution
h. Work management

13
3. NON MANUFACTURING CRITERIA

1. Design leadership
2. Being an existing supplier
3. Marketing and sales
4. Brand name
5. Technical liaison and support
6. After sales support

14
1.MANUFACTURING RELATED AND MANUFACTURING SPECIFIC
CRITERIA
a. COST
• Each product that manufacturing produces has a cost. All things
being equal, a low cost gives a low price and provides a better
opportunity for profit than does a high cost.

• Product cost is a straightforward concept, but it can be tricky to

measure, especially when manufacturing has large overhead cost is,
relative to the other manufacturing outputs, the greater will be the
investment in a manufacturing cost accounting system to track and
measure.

15
a. COST
• According to Hill (1993), price becomes a dominant competitive
advantage when there is little scope for differentiating a product.
Although price is the external criterion, cost is the internal measure.

• Thus, the objective of the manufacturing system is to produce a

product, which meets given design specification and quality
required as well as at a minimum cost.

• This low cost is necessary to support the price-sensitivity of the market-

place, thus creating the level of profit margin necessary to support
the business investment involved and create opportunity for the
future.

• Understanding the product cost structure is not only critical to

comprehending the process of estimating but it is also important in
cost reduction efforts.
16
Direct Cost + Direct material = Prime cost

Prime Cost + Factory overhead = Factory cost

Factory Cost + Administration = Manufacturing

Overhead Cost

Manufacturing Cost + Selling Expenses = Total Cost

Total Cost + Profit = Selling price

Figure: An Example of Traditional Cost Structure

Source: Gutman (1985).
17
The Effect of Advanced Manufacturing on Manufacturing Cost

▪ The introduction of technologies such as CNC machines, machining

centers, and robots has drastically changed the manner in which real
costs are calculated (Monden, 1992).

▪ Specifically it has changed the distribution of directs cost, and has

reduced the contribution of direct labor cost. Automation and
programmable machines have reduced the extensive need for
labor. The flexible manufacturing cells and systems can be
programmed to run ‘unmanned’ for a considerable period. The
flexibility of machines and equipment also means that less
specialized equipment is needed for processing.

18
The Effect of Advanced Manufacturing on Manufacturing Cost
(continue)

▪ This will reduce the direct fixed cost, but on the other hand increasing
the indirect fixed costs, such as change-over and programs.
Furthermore, extra maintenance is required for machines running for
longer hours. Hence, high investment cost of automated equipment
necessitates the development of costing techniques that focus on
the effective use of the manufacturing resources.

▪ Accurate costing of products manufactured by advanced

manufacturing systems such as FMS is needed for competitive
bidding, pricing, make, or buy decision, and other management
decisions.

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The Effect of Advanced Manufacturing on Manufacturing Cost (continue)

• Besides the shift in focus from that of direct labor to the optimum
use of the manufacturing resources, issues such as flexibility and
quality have become critical manufacturing performance
measures. In dealing with these changes the conventional cost
accounting methods which are based on mass production of
mature product with known characteristics and a stable
technology, have been found to have some limitations. Theses
include the following (Key, 1987):

• Direct labor is not easily and accurately allocated to the unit being
produced

• Direct labor does not always vary with the level of production

• Overheads allocations are often inaccurate

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The Effect of Advanced Manufacturing on Manufacturing Cost (continue)

• In advanced manufacturing environment, the role of overheads has

become increasingly important. The overheads rates between 500-
800 percent of direct labor cost have been cited (Key, 1987).

• Other overheads include machine set-up costs, tooling costs,

materials handling cost, materials handling costs, equipment
maintenance costs, part inspection costs, shop supervisor costs,
production control costs, prototype and new-part costs, rework and
scrap costs (Klahorst, 1983). Today, to think of the machine hours and
equipment costs as cost drivers and direct labor as overheads.

• The influence of quality, part waiting and equipment idleness is also

significant and these are often quoted as 25-35 percent, 11 percent
and 30 percent respectively of the manufacturing cost (Park and
Son, 1987).
21
 An Example of Cost Structure for Advanced Manufacturing System Setup labour
Raw materials
Labour
Production Manufacturing Machines
expenses Tools
Floor Space
Depreciation Software
Total Cost
Prevention
Quality cost Appraisal
Failure
Equipment
Flexibility Cost Product
Process
Demand

Selling Expenses
Non Production Administrative Expenses
Financing Cost

▪ The model indicates the reduction in the impact of direct labor cost, by combining it
with indirect labor and aggregated to labor cost. The prominence of overhead is
shown by its components of setup labor, machine, tool and floor space. The software
cost reflects the significance of manufacturing computerization.

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b. Quality

• In manufacturing strategy, quality is associated with conformance to

specifications and critical customer expectations. There is one various
definitions of product quality, some of which include: ‘its ability to
satisfy stated or implied needs’ (British Standard, 1987); ‘conformance
to customers’ requirements (Crosby, 1979), and ‘fitness for purpose or
use (La Diega et al, 1993).

• These definitions indicate that quality of a product is fundamentally

related to meeting the customer satisfaction. However it is difficult to
define quality in quantitative terms as customer satisfaction depends
not only on the actual features of a product, but also a host of other
subjective factors.

23
 Function Typically
Dimensions Of
Description Responsible For Their
Quality
Provision
1. Performance A products primary operating Design
characteristics
2. Feature Secondary characteristic Design
3. Reliability The probability of a product Design
malfunctioning within a given period

4. Conformance The degree to which a product is Manufacturing

manufactured to the agreed
specification
5. Durability A measure of a products life in Design
terms of both its technical and
economic dimensions
6. Services Ability The ease of servicing to include the Design and after sale
speed and provision of after sale
service
7. Aesthetics How the final products looks Design
8. Perceived Quality How a customer views the product Design

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▪ The quality of products is influenced by the activities within
manufacturing system such as product planning, product design,
process design, production, and after sale service. With regard to
advanced manufacturing systems, quality has two important
considerations:

1. The move from a mass production system, where repeatability of

the manufacturing process becomes important, towards low
volume low volume or even one of a kind production, has
rendered necessary adjustments to the statistical methods since
the population of items that are typically used for deriving
statically meaningful measures for quality may not be available
(Chryssolouris,1992).
2. It has also been observed that many companies are moving from
manufacturing process quality control to product development
quality control. This is undertaken to overcome the limitation of
statistical quality control as defect prevention through variation
reduction (Fortuna, 1988). 25
c. DELIVERY TIME AND DELIVERY TIME RELIABILITY

▪ The delivery manufacturing output comprises delivery time and

delivery time reliability. Delivery time is the amount of time a
manufacturer requires to supply a product to a customer.

▪ Usually delivery times are well known and are used to make delivery
promises when they place their orders. Often, especially in busy
times, manufacturing cannot meet delivery dates and customers are
told that they will receive their orders later than promised. When this
happens, delivery time reliability drops.

▪ Customer expectations for delivery time and delivery time reliability

have increased dramatically in recent years as a consequence of
the development of just in time. Customers now expect to be
supplied on time and in small lots.
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▪ Delivery is an important requirement put on the manufacturing
organization by the customers. Both of aspects of delivery i.e.,
delivery reliability and delivery speed are important attributes of time.

▪ Delivery reliability is a measure of how a manufacturing system can

deliver on time, and delivery speed is the ability to delivery more
quickly than its competitors. Hill (1993) provides detail discussion on
delivery reliability and delivery speed and considers them as
important order winning criteria. Ashton and Cook (1989) on the
other hand consider delivery reliability as a fundamental requirement
for a manufacturing firm to compete upon.

▪ Thus meeting delivery requirement is an important aspect of time to

market (TTM) concept (Parwar et al, 1994).

27
• The way time is managed has also been mentioned as a powerful
new source of competitive advantage for leading companies (Stalk,
1991). As a strategic weapon, time is the equivalent of money,
productivity, quality and even innovation. The work of Schmenner
(1988) has shown that management focus on throughput time has
knock on effect on the reduction of inventory, set up time and lot
size, encourages improved quality, factory layout, stabilized
production schedules and minimized engineering changes.

• Despite the significant influence delivery has on the competitiveness

of manufacturing firms, it has been mentioned that of all resources
used in manufacturing operations, the most critical and least well
managed is time (Plossl, 1988). In fact, few companies treat the
management of time as a strategic issue at all (Christopher and
Braithwaite, 1989).
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▪ Throughput time is the most important time element as it truly reflects
the capability of a manufacturing system. Figure 2.6 shows the
element that constitutes process lead time (Burbidge, 1980). Of an
average of 5% of the time that a part spends on a machine, less than
30% is spent in the actual metal removal.

▪ Production rate is the term sometimes used to indicate hoe quickly a

product can be produced by the system (Chryssolouris, 1992). The
production rate of a system is the number of acceptable pieces
produced per unit time, taking into account delays during
production and unpredicted interruptions such machine
breakdowns. Thus the production rate of a manufacturing system is
significantly affected by the reliability of the equipment and the
overall structure of the system.

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 Time to Machine

5% Moving and Waiting

95%

Cutting Positioning, Loading, Gauging, idle, etc

30% 70%

The Element Of Throughput Time (Process Lead Time)

Source: Burbidge (1980)

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▪ Lead time reduction is an important manufacturing system design
consideration which can be achieved more effectively by managing
the resources employed. These include preventing bottlenecks in all
processes, controlling the job queues at each work centre, and
eliminating the lead times for non-added value activities (Beal, 1989).
Groover (1987) presents a number of automation strategies that can
be adopted in order to reduce lead time, by considering that
manufacturing lead time (MLT) can be represented as

MLT = Nm (Tsu + QTo + Tno)

▪ Where To=Tm + Th + Tth; Nm= number of machines; Tsu= set-up time; Q= batch
quantity; To= operation time per machine; Tno= non-operation time for each
process; Tm= actual processing time; Th= workpiece handling time; and Tth=
tool handling time per workpiece.
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The Number of Automation Strategies

Manufacturing
Objective to Reduce
Strategy Function
Specialization of operations 1 Tm. To
Combined operations 1.2 Th. Tth. Nm
Simultaneous operation 1.2 Th. Tm. Tth. Nm
Integration of operations 1.2 Th. Nm
Reduce set up time 1.3 Tsu
Improve material handling 2 Tno
Process control and 1.3 Tm
optimization
Computerized database 4 Nm. Tno
Computerized control 3.4 Tno

Source: Groover (1987)

Note:
Key to the manufacturing functions: 1 = Materials processing and assembly;
2 = materials handling; 3 = control-process and plant level; and
4 = manufacturing database development.

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d. FLEXIBILITY AND INNOVATIVENESS

• Like quality, flexibility and innovativeness are often treated as a single

manufacturing output by those outside manufacturing. However,
good manufacturers must differentiate between the two. To illustrate
the difference, consider the apparel industry. A clothing
manufacturer is flexible when he/she can easily change product mix
and production volumes in response to changes in fashion and
season.

• This is flexibility because it is the ability to increase or decrease

production of existing products. Innovativeness is the ability to
produce new products. A tailor is more innovative than flexible.

• A tailor has little difficulty producing a suit from a new design. It is

more difficult, however, to double the number of suits produced in a
month. 33
d.FLEXIBILITY AND INNOVATIVENESS

• Differentiating between flexibility and innovativeness helps good

manufacturers design and manage production systems that will
provide high levels of whichever output is most important to their
customers.

• Flexibility in manufacturing means being able to reconfigure the

manufacturing system so as to produce efficiently in the changing
environment (Dooner, 1991).

34
• Manufacturing flexibility is one of the key issues in the design,
operations and management of manufacturing systems today.

• Three factors that govern its prominence are (1) the increasing
turbulence of the market in which manufacturing companies
operate, as reflected by the great variation in demand for products
and services, the competitive markets, shorter product life cycle,
quicker development of new products, increasing variety of product,
etc.; (2) the availability of new manufacturing technologies based on
microprocessor technology which has widened the scope of system
selection; and (3) the change in the nature of production
management aims which has widened beyond the scope of cost
and productivity issues alone.

35
• Many types of flexibility have been described and these are
summarized in Table 2.4 (Barbar and Rai, 1989; Browne et al, 1984;
Kim, 1991; Kusiak, 1985; Sethi and Sethi, 1990).

• Manufacturing flexibility clearly has major implications for a firm’s

competitive strength, and makes it an important part of the firm’s
strategy. Increasingly flexibility is considered as a critical success
factor, in addition to the traditional factors of cost and quality

36
• Flexibility is a very complex concept. At the production organization
level, flexibility is a function of four interrelated variables (Linberg et
al, 1988). (1) Flow structure and layout, (2) equipment and
machinery, (3) control and system, and (4) work organization.

• Flexibility can be achieved through manipulating any of the four

factors-each is dependent on the conditions set by the other three.
Any one of them can also limit the flexibility of a system.

• Kim (1991) provides the following factors that can influence the
operational flexibility of the manufacturing systems: factory network;
supplier network and relation; workforce; rules and procedures;
machine and equipment; and information systems.

37
2.MANUFACTURING RELATED BUT NOT MANUFACTURING
SPECIFIC CRITERIA

▪ Although businesses separate clusters of activities into different

functions, in reality they are and need to form part of the same
whole. Thus, many functions within a company will directly support
manufacturing or will undertake tasks that link or directly affect that
function’s strategic and operational roles.

38
a. PRODUCT DESIGN

• The links between design, manufacturing and markets are the very
essence of a business. The way that these interrelate, therefore, is a
fundamental, strategic issue. Both design and manufacturing’s aim is
to provide products according to their technical and business
specifications.

• In addition, these two functions also combine to provide the product

developments that come before the ongoing selling / manufacturing
activity, which is the commercial substance of companies. Three of
the more important dimensions are addressed in this section and
have been chosen because they are fundamental to this corporate
activity.

39
b. DEMAND MANAGEMENT

• To bridge the gap between their supply and demand chains,

companies should consider implementing technologies that give
them increased control over their “Demand Management”
processes.

• Demand Management solutions can help drive the convergence of

supply and demand chains by harnessing accurate and reliable
information from a variety of direct and indirect channels, managing
demand forecasting, inventory allocation, and entitlement processes
efficiently, and then providing closed-loop integration between key
demand and supply chain systems.

40
b. DEMAND MANAGEMENT

• By feeding accurate information from the demand chain into the

supply chain while unifying communications and processes across
both organizations, Demand Management systems can dramatically
increase inventory turns, reduce inventory write-offs, increase
revenues, and improve manufacturers’ competitive position in their
markets.

• Demand management, also called strategic spends management or

consumption management, involves all activities associated with
managing the volume of a company’s external purchases. Through
demand management, companies gain a better understanding of
the rationale behind their purchases.

41
b. DEMAND MANAGEMENT

• Unlike traditional sourcing efforts, it targets the quantity of products

purchased from suppliers not just the price paid. Demand
management reaches beyond strategic. Where strategic sourcing
provided a well-defined method for supplier management,
effectively controlling the price paid for goods and services.

• Demand management goes a step further, attacking the other

element of the cost equation: consumption. Strategic sourcing
initiatives touch on specifications and compliance, but managing
quantity is generally not the area of emphasis.

• Demand management handles quantity, enabling companies to

reduce and even eliminate entire areas of spend.

42
c. CAPACITY PLANNING

▪ Capacity planning involves balancing capacity with demand.

Capacity is the amount of traffic or processing that a resource is
capable of supporting; demand is the load that users or applications
place upon that resource.

▪ Capacity planning is the process used to evaluate the current trends

in resource usage and plan for growth and changes before problems
occur. Capacity planning can serve as a reality check, prompting an
organization to come to terms with its current business plan and its
goals for the future.

43
c. CAPACITY PLANNING

▪ Generally, capacity planning begins with gathering and analyzing

current data and making short-term, day-to-day adjustments. Next,
estimates for near-term needs covering weeks or months are made
so that an organization can evaluate trends. Finally, projections of
future needs that may cover months to years are made using the
current data and the estimated resources required to accomplish
business goals.

▪ Developing a comprehensive capacity plan can be a daunting

challenge at the outset and requires dedication and commitment to
maintain it on an ongoing basis. The following 10 tips can help ease
some of the challenge and increase your likelihood of an effective,
successful program.

44
c. CAPACITY PLANNING

▪ Finally, projections of future needs that may cover months to years

are made using the current data and the estimated resources
required to accomplish business goals.

▪ Developing a comprehensive capacity plan can be a daunting

challenge at the outset and requires dedication and commitment to
maintain it on an ongoing basis. The following 10 tips can help ease
some of the challenge and increase your likelihood of an effective,
successful program.

45
1.Start Small

• Many a capacity planning effort fails after a few months because it

encompassed too broad a scope too early on. This is especially true
for shops that have had no previous experience in this area. In these
instances it's wise to start with just a few of the most critical resources
say, processors or bandwidth and to gradually expand the program
as more experience is gained.

46
2.Speak the Language of Customers

• When requesting workload forecasts from developers and especially

end-user customers, discuss these in terms that the developers and
customers understand. For example, rather than asking for estimated
increases in processor utilization, inquire as to how many additional
concurrent users are expected to be using the application, or how
many of a specific type of transaction are likely to be executed
during peak periods.

47
3.Consider Future Platforms

• When evaluating tools to be used for capacity planning, keep in

mind new architectures that shop may be considering, and select
packages that can be used on both current and future platforms.
Some tools that appear well suited for your existing platforms may
have little or no applicability to planned architectures. This
consideration should extend not just to servers, but to disk arrays,
tape equipment, desktop workstations, and network hardware.

48
4.Share Plans with Suppliers

▪ If you plan to use your capacity planning products across multiple

platforms, it's important to inform the software suppliers of plans.
During these discussions, make sure that add-on expenses the costs
for drivers, agents, installation time and labor, copies of licenses,
updated maintenance agreements, and the like are all identified
and agreed upon up front. Reductions in the costs for license
renewals and maintenance agreements can often be negotiated
based on all of the other additional expenses.

49
5. Anticipate Nonlinear Cost Ratios

▪ Some upgrades will be linear in the sense that doubling the amount
of a planned. This is sometimes referred to as the knee of the curve,
where the previous linear relationship between cost and capacity
suddenly accelerates into exponential increases.

50
6: Plan for Occasional Workload Reductions

• A forecasted change in workload may not always cause an increase

in the capacity required. Departmental mergers, staff reductions,
and productivity gains may result in some production workloads
being reduced. Similarly, development workloads may decrease as
major projects become deployed.

• While increases in needed capacity are clearly more likely,

reductions are possible. A good guideline to use when questioning
users about future workloads is to emphasize changes, not just
increases.

51
7. Prepare for the Turnover of Personnel

▪ One of the events that undermine a capacity planning effort early

on is when the individual most responsible for and most
knowledgeable about the overall program leaves the company.

▪ Regardless of the preventive measures taken, there is no guarantee

that attrition will not occur. But several actions can mitigate the
impact.

52
7. Prepare for the Turnover of Personnel

▪ One action to take is to carefully interview and select an individual

who in the best judgment appears unlikely to leave the firm anytime
soon. Another tack is to ensure that the process is thoroughly
documented. If resources are available, training a backup person is
another way to mitigate turnover. Finally, in extreme cases an
employment contract may be used to sustain ongoing employment
of a key individual.

53
8.Strive to Continually Improve the Process

▪ One of the best ways to continually improve the effectiveness of the

capacity planning process is to set a goal to expand and improve at
least one part of the process with each new version of the plan.

▪ Possible enhancements could include the addition of new platforms,

centralized printers, or remote locations. A new version of the plan
should be created at least once a year and preferably every six
months.

54
9.Institute a Formal Capacity Planning Program

▪ Some shops initiate a capacity planning program in a very informal

manner in order to simply get something started. There's nothing
wrong with this approach if the intent is merely to overcome inaction
and to start the ball rolling. This can also help raise awareness of the
need to evolve this initial effort into a formal capacity planning
program.

55
10.Market the Lesser-Known Benefits of Capacity Planning

▪ In addition to being able to predict when, how much, and what type
of additional hardware resources will be needed, a comprehensive
capacity planning program offers four lesser-known benefits that
should be marketed to infrastructure managers and IT executives.

▪ These benefits can improve an infrastructure by doing the following:

– Strengthening relationships with developers and end users.

– Improving communications with suppliers.

– Encouraging collaboration with other infrastructure groups.

– Promoting a culture of strategic planning as opposed to tactical

firefighting.

56
d. INVENTORY MANAGEMENT

▪ Effective inventory management allows a distributor to meet or

exceed his (or her) customers’ expectations of product availability
with the amount of each item that will maximize the distributor’s net
profits. Inventory is usually a distributor’s largest asset. But many
distributors aren’t satisfied with the contribution inventory makes
towards the overall success of their business:

➢ The wrong quantities of the wrong items are often found on

warehouse shelves. Even though there maybe a lot of surplus
inventory and dead stock in their warehouse(s), backorders and
customer lost sales are common. The material a distributor has
committed to stock isn’t available when customers request it.
57
d. INVENTORY MANAGEMENT

➢ Computer inventory records are not accurate. Inventory balance

information in the distributor’s expensive computer system does
not accurately reflect what is available for sale in the warehouse.

➢ The return on investment is not satisfactory. The company’s profits,

considering its substantial investment in inventory, is far less than
what could be earned if the money were invested elsewhere.

58
e. SHOP FLOOR MANAGEMENT SYSTEMS

• Shop Floor Management Systems have been becoming increasingly

more affordable as more manufactures begin to implement these
systems. They are quickly becoming more of a necessity than an
option. Many small and medium sized manufacturers are beginning
to explore the feasibility of using such systems.

• Once they begin to understand how these systems work they begin
doing the preliminary preparation work and process modifications
necessary to economically and efficiently implement this
technology.

59
f. QUALITY MANAGEMENT

▪ A myriad of meanings define what quality means to different

constituents involved with a product or service. Its concentrate on
quality from the perspective of two different sources: the consumer
and the producer. This perspective of quality is actually easy to
define, but very difficult to measure.

*myriad :pelbagai

▪ The measurement difficulty arises because quality is based on the

"eye of the beholder." Each consumer may have a different need,
want, or taste, so each consumer may see similar products quite
differently. Two basic ways of defining a consumer’s perspective of
quality are:

60
f. QUALITY MANAGEMENT

❑ Fitness for use – how well does the product or

service do what the consumer or user thinks it is
supposed to do and wants to do?

❑ Quality of design – the degree to which quality

characteristics are designed into the product.

61
g. DISTRIBUTION

▪ Distribution’s role in quick and reliable delivery has been mentioned

earlier. As part of the total process, distribution plays an essential role
in delivery. In addition, the costs of this facet of overall provision have
typical been rising both in themselves and as a percentage of the
total. Including the cost has typically not received the same level of
attention as the product itself.

▪ Classic examples of this are items that have experienced systematic

and significant cost reductions over a number of years, such as
computers. Highlighting this potential source of cost reduction has
often not received the attention that related activities have.

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h.WORK MANAGEMENT

▪ Work Management is an integrated set of functions that automate

the management and tracking of work assignments within the Policy,
Claims and Billing & Collections components, allowing the
organization to streamline workflows and continuously improve the
processes.

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3. NON MANUFACTURING CRITERIA

▪ It is unusual for companies to be in markets whose relevant order-

winners are not directly related to manufacturing. In these types of
markets, manufacturing will typically be required to support one or
more qualifiers.

▪ Some of the more important criteria that frequently characterize

markets are now briefly discussed.

▪ In all instances, each function responsible for the criterion reviewed

would have the task of providing and maintaining the required level
of support.

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a. DESIGN LEADERSHIP

▪ The role of design and its relationship to competitive issues such as

product-development lead times and product costs have already
been discussed.

▪ However, one of the design function’s principal roles concerns the

development of products in term of features, aesthetics, perceived
levels of design in specification, and reliability (including cost) while in
service.

▪ Further more, where frequent design introductions offer a

competitive edge, this requirement will be at the forefront of the
function’s performance priorities. Linked to the need for shorter
product development lead times, this criterion is increasingly
emerging as a major competitive factor in today’s market.
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b.BEING AN EXISTING SUPPLIER

▪ Where a company is an existing supplier, it may continue to win

orders in part, or solely, because of this factor. The criterion tends to
be relevant to both low volume and spares markets. In the former,
manufacturing needs to continue support the relevant order-winner
and qualifier. In the latter, it needs to recognize the impact that its
performance on relevant criteria will have on orders for any new or
existing products in the future.

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c. MARKETING AND SALES

▪ The marketing and sales functions’ principal orientation is toward the

marketplace. Its important links to customers and its insights into the
characteristics of relevant market segments including issues of
pricing, competitive threats, growth and/or decline of existing
segments and identification of new opportunities is an essential part
of a company’s strategic provision.

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d. BRAND NAME

▪ Through a variety of a activities, including design, advertising, and

increasing or maintaining market share, companies seek to establish
brand names for their products. Where this has been achieves and
maintained, companies will win orders, which is partly due to the
image its products have in the markets in which they complete.

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e. TECHNICAL LIAISON AND SUPPORT

▪ In certain markets, customers will seek technical liaison from suppliers

during the pre-contract phase and technical support thereafter. The
quality and extent of a supplier’s in-house technical capability to
support product development, particularly toward its introduction in
early stages of its manufacturing, will be an important criterion in
these markets.

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f. AFTER SALES SUPPORT

▪ Furthermore, companies may look for ways of differentiating their

total product by offering, for instance, a high level of customer
support. One example is BMW. The company has a fleet of 30 cars
funded jointly with its dealers and strategically placed throughout the
United Kingdom.

▪ The purpose is to go to the support of any BMW that has broken

down by the roadside. The company will continue to increase this
standby fleet until it can sufficiently deal with 80 percent of the
breakdowns occurring in all the BMWs in the United Kingdom that
can actually be solved at the roadside.

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 THE ENVIRONMENT INFLUENCE
MANUFACTURING STRATEGY

1. The physical and social factors outside an organization’s boundaries,

which are directly relevant to the organization in achieving its goals.

2. The environment causes management concern because it is made up of

those critical components that can influence the organization’s
effectiveness.

3. It includes

– customers,

– suppliers of inputs,

– competitors

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 THE ENVIRONMENT INFLUENCE
MANUFACTURING STRATEGY

– governmental regulatory agencies,

– labor unions,

– trade associations,

– public pressure groups and

– current technology.

Note:
▪ The uncertainty arises from the dynamic nature of the environment, in which the factors
of the organization’s environment change over time. In contrast, relevant factors in a
static environment remain basically the same over time. Since uncertainty is a threat to
an organization’s effectiveness, management attempts to minimize it.
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