MANUFACTURING STRATEGIES AND GAP ANALYSIS

ABSTRACT

Nowadays every company is trying to spread their wings in the global and domestic markets, for this they are using various business strategies, be it marketing or manufacturing. There are many manufacturing innovation process like TQM, TPM, QFD, JIT etc. This study has the purpose of testing the importance of consistency between manufacturing strategies and practices in achieving better business performances. An empirical test has been conducted & compared on the data sets of 3 different countries and gap analysis is also noted

INTRODUCTION
There are many three letter manufacturing innovation approaches such as BPR (Business Process Reengineering), TQM (Total Quality Management), TPM (Total Productive Maintenance), QFD

First deals with competitive priorities such as quality. Consistency measures along with other strategy and implementation measures are then compared to investigate which measures are more effective to differentiate high & low performance ones. the manufacturing task and the pattern of choices. An empirical test has been conducted on the data sets from three different nations. Manufacturing has the power to strengthen or weaken a company¶s competitive ability. while second is considered with manufacturing structure and infrastructure that company makes to achieve manufacturing tasks. In order to be more competitive and profitable all most all companies are using these strategies nowadays. The four basic pillars of manufacturing are cost efficiency. flexibility etc. MANUFACTURING STRATEGIES Manufacturing strategy is an important functional component of business strategy. Strategically important activities should be given more importance and under allocation of manufacturing resource should be avoided to achieve a more balanced and cost effective use of them. practices and performances. CAD (Computer Aided Drafting). Manufacturing strategies consists of two elements. JIT (Just In Time). each of which have quite different manufacturing capabilities and competitive environments. flexibility and . There have been many theoretical and empirical researches to investigate relationship between manufacturing strategies. This is to see whether a consistencyperformance relationship can be generalized. quality. cost.MANUFACTURING STRATEGIES AND GAP ANALYSIS (Quality Function Deployment). CAM (Computer Aided Manufacturing).

For example. This study helps to highlight the importance of manufacturing strategy to productivity The relationship between business strategic orientation and manufacturing strategic orientation and business performance has been analyzed. aligned with business strategies and goals can produce better performances. One-study reports that internally and externally oriented business have achieved the competitive advantage with higher returns on investment and lower business risk components. This framework has generally influenced the terminology and direction of manufacturing strategy research Many empirical studies have reported that well formulated and effective manufacturing strategies. a study reveals that the business units with a formulated manufacturing strategy outperformed the business units without one in terms of business performance such as return of sales. MANUFACTURING PRACTICES AND PERFOMANCES .MANUFACTURING STRATEGIES AND GAP ANALYSIS dependability. manufacturing activities and manufacturing performance measures. Based on competitive priorities three distinct clusters of manufacturing strategy groups have also been formed and compared in terms of the business context.

Introduction. . This type of reengineering of the product and saving it by including new features and dimensions and thereby increasing its sales once again is called business process reengineering. which suggest that a product has 4 stages in its life cycle. Here we look into detail of some of the common manufacturing practices used worldwide 1) BUSINESS PROCESS REENGINEERING (BPR) A common theory among marketing managers is the product life cycle theory. TOTAL QUALITY MANAGEMENT (TQM) Total quality management is an enhancement to the traditional way of doing business.MANUFACTURING STRATEGIES AND GAP ANALYSIS There are many manufacturing practices used by companies. So BPR is an important manufacturing practice nowadays. so HM face lifted ambassador by including latest features like power windows and power steering and as a result sales of ambassador is now again started increasing. maturity & decline. but after maturity the product sales slowly starts to decline down and finally it comes to standstill. TQM integrates fundamental management techniques. which is also very effective. Maturity is that level where the product attains maximum profit & demand. growth. For example Hindustan Motors (HM) realised that sales of the ambassador is dipping at a very alarming rate towards end of 1990¶s. so the company will do extensive research under its R&D department and finally a renewed product is fed into the market. existing improvement efforts and technical tools under a disciplined approach. If that happens company will loose money and reputation.

no teamwork. increase in total assets etc.MANUFACTURING STRATEGIES AND GAP ANALYSIS TQM requires six basic concepts: 1) A committed and involved management to provide long term organizational support 2) An unwavering focus on the customer. 3) QUALITY FUNCTION DEPLOYMENT (QFD) Quality function deployment is a planning tool used to fulfill customer expectations. TQM is a customeroriented practice. QFD focuses on customer expectations . increase in sales. improper planning. both externally & internally 3) Effective involvement and utilization of the entire work force 4) Continuous improvement of the business and production process 5) Treating suppliers as partners 6) Establish performance measures for the process The purpose of TQM is to provide a higher quality product at a lower price and thereby increasing its position in the market. inadequate attention to customers Main benefits of TQM are growth in operating income. It is a disciplined approach to product design. In TQM small organizations will be able to make the transformation much faster than large ones. which gives top priority to service and cost. engineering and production and provides in-depth evaluation of the product. inability to change organizational culture. Different obstacles in TQM are lack of management commitment.

QFD is a team-based management tool in which customer expectations are used to drive the product development process. less work in process. The result JIT production is less inventory of raw materials.MANUFACTURING STRATEGIES AND GAP ANALYSIS or requirements. It is employed to translate customer expectation in terms of specific requirements that can be deployed through many processes. the quality of incoming materials must be very good or the production line must be shut down. and. Because there is little or no inventory. Benefits of JIT production are a significant reduction in floor space. Consequently. an organization is guaranteed to implement the voice of the customer in the final product. QFD enables the design phase to concentrate on customer requirements. promotes team work and provides documentation. components and assemblies to production at the exact time they are needed. Various benefits of QFD includes improved customer satisfaction . and shorter lead times. 4) JUST IN TIME (JIT) Just in time production is a process-control method and production philosophy that provides parts. QFD helps in identifying new quality technology and job functions to carry out operations. thereby spending less time on redesign and modifications. smaller inventories of parts. care must be taken to choose suppliers with excellent quality products and services as well as knowledge of production lead and process times. less overhead. A possible pitfall of JIT production is a reduction of inventories to critically low levels. most importantly. By implementing QFD. To be successful JIT requires exceptional quality and reduced setup . a reduction in cost. The supplier must drastically reduce time setup time or its cost will increase. reduces implementation time.

using their skills and ingenuity. they are necessary to build a foundation for a successful TPM environment. Most noted example is that of Rolls Royce which makes cars according to personal interest under a specified time 5) TOTAL PRODUCTIVE MAINTAINENCE Total productive maintenance is keeping the current plant and equipment at its highest productive level through cooperation of all areas of organization. have a common objective in peak performance or total productivity. This approach does not mean that such basic techniques are not used.MANUFACTURING STRATEGIES AND GAP ANALYSIS times. Individuals working together without regard to organizational structure. The total maintenance function should be directed towards the elimination of unplanned equipment and plant maintenance. The over goals of TPM are 1) Maintaining and improving equipment capacity 2) Maintaining equipment for life 3) Using support from all areas of cooperation 4) Encouraging input from all employees 5) Using teams for continuous improvement The basic steps to get an organization started towards TPM 1) Management learns new philosophy 2) Management promotes new philosophy .

The power of CAD allows changes to be easily incorporated in to the drawings in a fraction of time required by old methods. . Drawings from CAD can be easily fed into software packages such as computer aided manufacturing. these drawings can be drawn in planar view. design for manufacture and CNC machines. Another major advantage of CAD is its compatibility with downstream production and engineering software and hardware.MANUFACTURING STRATEGIES AND GAP ANALYSIS 3) Training is funded and developed for everyone in the organization 4) Areas of needed improvement are identified 5) Performance goals are formulated 6) An implementation plan is developed 7) Autonomous work groups are established An effective total productive maintenance program will lead to improved quality and productivity 6) COMPUTER AIDED ENGINEERING (CAE) Computer aided engineering is of mainly two types 1) Computer-aided drafting 2) Computer-aided manufacturing CAD & CAM have bridged the gap between design and rapid prototypes CAD Computer aided drafting software is used to produce engineering production drawings. with complete dimensioning and tolerancing. isometric view & 3D perspective.

CAM software identifies critical machining parameters base primarily on geometry. lathes and presses that are completely controlled by a microprocessor are called computer numerical control (CNC) machine tools. performance measurement systems and improvement actions EMPIRICALSTUDY . Machine tools. dimensions and tolerances and material.MANUFACTURING STRATEGIES AND GAP ANALYSIS CAM Computer aided manufacturing software is used to identify machine tool paths and other production parameters to optimize the machining of a part. Once a part has been completely drawn using a CAD. Combination of management techniques and management accounting practices enhance the performance of companies under a particular strategic orientation In many companies there is still a lack of consistency between business strategy. size. it can be easily transferred to CAM program and then machined through an interface between the CAM program and CNC machine. such as mills. All the above strategies mentioned are equally effective and can produce positive results for the company. CAM systems work seamlessly with most CAD.

Items about manufacturing practices were selected in section C & profit before tax sales and inventory values are selected from Section D SCALE RELIABILITY . GAP analysis. Discriminant analysis THE SAMPLE The questionnaire survey for this research was conducted as a part of International Manufacturing Strategy Survey 2 (IMSS) initiated by PerLindberg. This research focuses on how different manufacturing strategies effect affect company performance. Nine Strategic orientation items. Questionnaire. London School of Business in England. Chalmers University of Technology in Sweden. 41 American. Scale reliability method. 29 Japanese companies selected from IMSS2 database SECTION Section A Section C Section D CONTENTS Strategies. Researchers from 20 different countries have been involved in establishing a common manufacturing database in order to compare different manufacturing strategies among nations.MANUFACTURING STRATEGIES AND GAP ANALYSIS We are doing the empirical study by four different methods. each refers to the relative perceived importance of the respective manufacturing goal. goals &costs Past &planned activities in manufacturing Performance measures The above sections include items such as strategic orientation or manufacturing goals to achieve. measured in a 5-point likert scale (5=very important) were selected from section A. Sample used consists of fifty Korean.

5096 0.5576 .MANUFACTURING STRATEGIES AND GAP ANALYSIS FACTORS Manufacturing strategy ITEM Cost Quality QUESTIONAIRE QUESTION CRONBACH @ - Practices Lower selling prices Product design and quality Manufacturing quality Flexibility Wider product range More new products Greater order size flexibility Delivery Faster deliveries Dependable deliveries Customer Superior customer service Service Cost ABC (Activity-based costing) TPM (Total Productive Maintenance) Energy conservation process Quality SPC (Statistical Process control) Quality Function Deployment Quality policy deployment Flexibility NC/CNC/DNC AGV¶s (Automatic Guided Vehicles) CAM/FMC/FAS Delivery JIT Lean production JIT delivers to customers Pull scheduling Customer Benchmarking Service KAIZEN (Continuous improvement) 0.5907 0.6869 0.5848 0.6543 0.6889 0.6364 0.

214 1.543) -2.96 (0.048) -2.531 1. Each of the categorized scales was stastically tested to see if it has high enough internal consistency or reliability. which is generally considered adequate for exploratory work.5 levels.626 1.64 (0. To analyze the overall effect of gap on company¶s performance.293 1. Median values of profit to sales ratio and inventory turnovers were used to divide these groups.02 (0.043) -2.062 1. flexibility.692 2. quality.008) Above table shows the difference between average gap values of the superior and inferior groups in terms of profit to sales . delivery &customer service.MANUFACTURING STRATEGIES AND GAP ANALYSIS Both the manufacturing strategy variables and the manufacturing practice variables were classified into 5 categories for further analysis in terms of generally accepted manufacturing capabilities: cost. Each scale was represented by average of respective item measures.801 1. CAPABILITY CATEGORY Cost Quality Flexibility Delivery Customer Service SUPERIOR GROUP 1.75 (0.108 1.680 T VALUE (p VALUE) -1.75 (0.086 INFERIOR GROUP 1. As shown in table all of cronbach¶s alpha values exceeds 0. Performance measures were also converted to two widely used business performance measures: profit to sales ratio and inventory turnovers GAP ANALYSIS The absolute value of the difference between each strategic orientation variable and respective practice variable was defined as the gap variable. the whole sample is divided into 2 groups: superior &inferior.008) -0.

851 1.All the gaps fail to show a statistically significant difference between these 2 groups. DISCRIMINANT ANALYSIS To apply discriminant analysis.MANUFACTURING STRATEGIES AND GAP ANALYSIS performance by manufacturing capability categories. Each value shows significant difference from each other. Higher the congruence between the strategic orientation and manufacturing practices a company has.32 (0.446 1.812 1.208) 0.668) 1. the higher its profit to sales ratio CAPABILITY CATEGORY Cost Quality Flexibility Delivery Customer Service SUPERIOR GROUP 1.32 (0.532 1.635) Above table shows the difference between average gap values of the superior and inferior groups in terms of inventory turnovers by manufacturing capability categories . For this discriminant analysis we differentiated groups by profit to sales ratio only since as mentioned above inventory turnovers .240 1.43 (0. practices implementation and the gap between them are considered as independent variables while superior and inferior groups are considered as dependent variables.48 (0.469 1.05 (0. Industry difference may have a higher effect on inventory turnovers than the gap variable.747) -0.157 INFERIOR GROUP 1. it may be as a result of relatively high difference of average in inventory levels among sampled industries.552 1. Again data sets from three different countries are taken and analyzed. strategic orientation.003 T VALUE (p VALUE) 0.332) 1.611 1.

the delivery gap is the only available variable in differentiating superior and inferior group.696 Significance 0. 1.051 Hit-ratio 100% From the above table. . USA and Japan were taken and three consecutive discriminant analyses were done. Discriminant analysis was carried out on a whole sample group in order to see which independent variable contributes most when the superior group is discriminated from inferior group.436 Wilk¶s Lambda 0. Now samples from three different countries namely Korea.000 Canonical Wilk¶s Cor.MANUFACTURING STRATEGIES AND GAP ANALYSIS seemed not to be appropriate as a performance measures of gap analysis. 0. were also done to confirm whether the proposed gap variables consistently outperform other strategy or practice variables across the nations.696 Chi-square 3. The result from discriminant analysis applied to all companies regardless of their origin is summarized in a table below Dependent Variable Performance Group Independent Variable Gap (delivery) Eigen Value 0. From this we can assess the independent variables have relative importance to dependent variables. Lambda 0.551 0.800 Sig.051 Discriminant function coeff. None of the strategies or practices variables are useful for discriminating these groups. But from the result of this discriminant analysis we may argue that it is not sufficient to simply place more emphasis on a certain strategic orientation such as certain manufacturing practice such as statistical process for analyzing a firm¶s performance.

981 -6.038 Chi-square 10.198 Sig. we can confirm that gap variable play an important role for discriminating performance groups in Korean sample too.MANUFACTURING STRATEGIES AND GAP ANALYSIS KOREAN SAMPLE Dependent Variable Performance Group Independent Variable Practices (Quality) Gap(quality) Gap(flexibility) Eigen value 1118.497 -5.000 Wilk¶s Lambda 0.015 Hit-ratio 100% Here we see that two gap variables (quality &flexibility) and one practice variable (quality) is statistically significant for discriminating the superior group from the inferior one. 1. Thus.530 Discriminant function coeff.001 Significance 0. US SAMPLE Dependent Variable Performance Group Independent Variable Gap (flexibility) Gap (cost) Wilk¶s Lambda 0. 5.000 Wilk¶s Lambda 0.073 0.027 Hit-ratio 100% . -4.428 Eigen value 1335.001 Significance 0.500 Canonical Cor.009 0.018 0.098 Sig. 1.020 0. 0. 0.027 Discriminant function coeff.036 0.109 Canonical Cor.001 Chi-square 7.399 -4.001 Wilk¶s Lambda 0.020 0. This result implies that a manufacturer in the Korean sample is more a superior performance group if its quality and flexibility focused strategic organization and practices.

999 Wilk¶s Lambda 0.001 Chi-square 6.50% No gap variable is included in the discriminant function in the Japanese sample.033 Discriminant function coeff.MANUFACTURING STRATEGIES AND GAP ANALYSIS For the US sample only the gap variables for flexibility for flexibility and cost are included as a statistically significant variable in the discriminant function.032 0. Instead. One possible reason might be that it has a relatively limited number of respondents. A manufacturer with less variation between strategic orientation and practice implementation in terms of both flexibility and cost has more probability of belonging to superior group in this sample.001 Significance 0. The consistency between manufacturing strategies and practices is more important than strategic orientation or practice implementation itself in achieving better performance.062 0. 7.167 Canonical Cor. it includes only variables regarding delivery and customer service.5%. . the hit ratio being only 62. JAPANESE SAMPLE Dependent Variable Performance Group Independent Variable Practice (delivery) Practice (customer service) Eigen value 891. 0.033 Hit-ratio 62. In Japan the consistency between strategies and practices is more important for achieving higher performance than strategic orientation or practice implementation alone. which may be considered to be marginally higher than the random estimation. 0.572 7.794 Sig.507 Wilk¶s Lambda 0. Japanese sample shows a less satisfactorily discriminating result compared to other samples.

An empirical test was conducted on the data sets from three different nations namely Korea. This international comparison is to see whether this consistencyperformance relationship can be generalized regardless of the nation specific characteristics of manufacturing systems. Her we have learned from this study is that the gap variable indicating inconsistency between manufacturing strategy and implementation practices play an important role than the strategy or implementation variable in discriminating superior and inferior performance groups. US and Japan. quality and cost show more important contribution for discriminating between business performance groups. the gap variables of flexibility. From the data obtained from US & Korea. REFERNCES . But none of these gap variables succeeds to outperform other strategy or implementation variables in discriminating between performance groups in Japan whose discriminating coefficients higher than the other two countries. From these we can find that the overall discriminating power of the proposed gap variables can be considered to be significant based on this finding.MANUFACTURING STRATEGIES AND GAP ANALYSIS CONCLUSIONS This study was conducted for the purpose of empirically testing the importance of consistency between manufacturing strategies and practices in achieving better business performances. each of which have varied manufacturing potential and competitive environments.

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