Management 65700

Manufacturing Strategy and Process Innovation

Krannert School of Management
Purdue University
Spring Semester 2021, First 8-week Module
Professor Thomas Brush

Office: KRAN 418 Class Meets:

Phone: 494-4441 (office); 532-5092 (mobile) T Th 1:10-2:40 PM.
E-Mail: brusht@purdue.edu Rawls 1062
Secretary: Karen Allen Office Hours:
KRAN 428, 494-4435 M-W: 2:00-3:00 p.m. ( email appt.)

Course URL (Brightspace): https://mycourses.purdue.edu/

(Lecture notes are available online so you can bring material to class to take additional
notes on lectures.)

Prerequisite:
Finance 61000 and Operations Management 66000 and Strategic Management 65000 –
helpful.

Required Reading:
- Pursuing the Competitive Edge, (2005) by Robert Hayes, Gary Pisano, David
Upton, Steven Wheelwright, John Wiley and Sons, ISBN 0-471-65579-1.
- Course Packet containing cases and readings.

COVID-19 ISSUES :

This class will be in person. I will record the class with Kaltura and will post to Brightspace. If I
get sick I will use zoom links to reach the class but will let you know ahead of time. There may
be some uncertainty here but we are a relatively small class and we should be able to make this
work. The zoom link is under the Syllabus module on Brightspace and is a separate submodule.
Just click on the link for the class # and join through zoom if needed.

Subject Matter:
In recent years many firms have rediscovered manufacturing and operations as a
potential source of strategic advantage. In general, these firms have sought to develop
capabilities in operations which provide a sustainable advantage in the marketplace. In
addition, successful firms have developed processes for understanding the cross-
functional implications of product and process choices. In this course we will seek to
understand the circumstances under which particular operating capabilities are most
beneficial and how such capabilities can be developed so that operations can be exploited
for competitive advantage.
 We will use a case and reading format to examine manufacturing strategy topics.
Specific topics will include capacity strategy, facilities focus, process choice, product
profiling, flexibility, value analysis, and building capabilities such as product/process
development, cycle time reduction in operations, quality improvement, organizational
learning. Many of the cases will feature a decision requiring both financial analysis
(NPV etc.) combined with an operational strategy issue. As management students,
decisions of this type demonstrate the contribution of management tools to the operations
function as well as how operations strategy criteria may be necessary to complement
normal financial decision making.
The course structure proceeds in 3 major sections: I. Overview of Operations
Strategy, II. Designing an Operations Strategy, and III. Selecting, Developing and
Exploiting Operating Capabilities. The second section is made up of two modules: A)
Facilities and Process Technology and B) Infrastructure: Systems and Organizational
Processes. The third section is made up of two modules: A) Selecting Capabilities and
Drawing Organizational Boundaries, and B) Developing Capabilities.

Learning Outcomes

By the end of the course you will be able to do the following:

1. Identify a fit between Competitive Priorities and Operational Choices.

a. Show how such a fit is accomplished in case analysis and write-ups.
b. Understand pressures to change competitive priorities or operational
choices.
2. Establish how capabilities emerge over time and enable a trajectory of competive
advantage.
a. Show how capabilities create options to change tradeoffs in competitive
priorities in case analysis and write-ups.
3. Identify financial implications of pursuing one competitive priority vs another.
a. Use financial analysis and discussion of capabilities to argue for
investment choices in case analysis.
4. Understand benefits of different approaches to supplier alliances. Consider
tradeoffs in goverenance cost, production cost, long term efficiency and
responsiveness in arms length, vertically integrated, and third way supplier
partnerships in case analysis.

Preparation and Participation

For the learning process to be really effective, it is necessary that you carefully
prepare the cases/readings before class and actively participate in the case discussions
during class. I expect you to be fully prepared for each class and may call upon you to
start the discussion or answer a specific question during the class on any day. Usually
such a question would be closely related to one of the discussion questions given to you
in your syllabus.
If for some reason you are not fully prepared on a particular day, let me know
before class so that I don't embarrass you inadvertently. If you do not let me know before
2
class I assume that everyone in class has thoroughly read the case, can answer the
discussion questions in considerable detail, and has a "point of view" on the case which
will provoke responses from other students in class discussion. I urge you to attend all
classes, even if you have not adequately prepared.
The ability to present one's ideas concisely and persuasively, and to respond
effectively to those of others is a key success factor in any managerial position. One of
the goals of this course is to help you sharpen that ability. Accordingly, I expect you to
effectively participate in the class - analyze, comment, question, discuss. Participation
enables you to learn from your colleagues and to help them learn from you - which is
what the case method is all about. I value and reward effective participation. I also
expect the class to help deal with people who monopolize the discussion without
contributing to the learning process of others. I will try to encourage people for whom
participating in class is difficult, however you are responsible for your own class
participation. Finally, I am particularly annoyed by armchair participants who sit back,
do not participate, and then gripe about the quality of other students' comments. If you
do not jump into the fray and make your opinions known in class, you have not
contributed to the learning process. The quality of the discussion is only as good as its
participants' comments. I will try to stand back from the process to encourage you to
develop your own sense of timing and constructive criticism.
From a manufacturing viewpoint we are involved in a co-production of learning.
What you learn from a case is very much closely aligned with what you put into it. It is
very important that you be engaged in discovering issues in these cases. After all, this is
the position you will be in if your job has an operations related dimension to it. This is
good preparation for problem solving and troubleshooting when you will be responsible for
identifying problems. If done properly, you will learn a lot from this course. Returning
students often say that the management issues that are discussed in these cases and in the
course are very similar to those that they face in their manufacturing related jobs.

Attendance:
If for some reason you must miss a class, please let me know in advance so that
your absence will not be unexplained. The best thing to do is e-mail me before class.
Because of Covid-19, absences will not count against your class participation grade. It is
hard to make up for a class discussion of a case, but if you do not attend a class, you can
email me a one page writeup of the key issue for class that day for class participation
credit. If a case, you can provide a decision analysis of the person in the case. If reading
you can summarize the reading. No amount of reading on your own though will give you
the depth of understanding that actively participating in a discussion will give you. This
is why I want to encourage you to attend classes.

Case/Article Integration Exercises:

There are three exercises designed to facilitate the integration of conceptual
articles with the case material. The questions for both the case and the article are
identified in bold before the case specific discussion questions. You only need to do 2

3
out of 3 of these Case/Article Integration Exercises. I will keep the highest two scores if
you do all three. If you only do 1, you will get 0 points for the second, so it is very much
in your interest to do both.
The Case/Article Integration exercise is neither a summary of the case nor a
summary of the article but is exactly as it sounds, an integration of the common
ground between the case and the article. This is up to you to synthesize these two
sources.
This gives you a chance to reflect on the case and the reading material and to
think about how the reading raises issues in the case which help in the understanding of
the case. The objective of these assignments is to provide an opportunity to think more
broadly about the case and also to demonstrate your knowledge of the article. These
should be handed in on the day of the case before class. Since we are going to talk about
the case in class, handing these in before class both provides an incentive to prepare for
class and makes sure that all the exercises have been written from the point of view on
the case before the benefit of class discussion. The exercises should be no more than 2
double-spaced pages.

Group Work:
Group work is very helpful for regular class preparation, and essential for the
mid-term group project. I will assign groups of three to four students. I do this because
you will eventually have to work with work associates that are assigned to you and to
make sure that your group is made up of people with diverse experiences and functional
training and preparation. The cases involve analytical and subjective analysis and both
must be integrated well for a final recommendation. I find groups made up of people
with different expertise tend to do better with these group projects.

There is one group-written project. It consists of a case write-up of the Stermon

Mills case (6 page double spaced maximum exclusive of exhibits) to be completed before
class. The discussion questions will lead to a critical choice in the case that you will need
to analyze in the paper. Make sure you combine the analytical treatment of the case with
the conceptual material in the associated article to make your decision. We will discuss
the case in class so late papers cannot be accepted. (I will ask for a peer evaluation of
this project. My reason to do so is so that there will not be free riders in effort on the
project and my hope is that all will be evaluated equally.)

Snow Days:
If the university is closed we will, of course, not have class. I will send emails
from Brightspace and post messages there about how to proceed with the syllabus.
Generally we will just discuss the case or material for the class that was cancelled on the
next class meeting and I will look ahead to think of cancelling some material in the future
to bring the sequence back in line with the syllabus.

4
Evaluation:
Class Participation (Individual) 25%
Case/Article Integration write-ups (do 2 out of 3)
(Individual see bold questions after case) 20%
Case Write-up (Group)
Stermon (Hint: presented week and a half before) 25%
Final Exam (Individual)
(Case Final Exam on issues covered throughout
the course- Exam given during Exam period) 30%
100%

5
 Section I.
Overview of Operations Strategy

T. 1/19
1. Topic: Overview, New Millennium, and Manufacturing Tradeoffs (on Brightspace),
Group Formation
Read: Ch. 1 “Operations Management Confronts a New Millennium”
Slides: Operations Management Confronts a New Millenium.ppt
CompetingThroughOperations.ppt

Th 1/21
2. Topic: Competition, Focus, Manufacturing Tradeoffs
Read: Ch. 2.1-2.4 “Operations Strategy: Origins and New Directions;” also Ch. 2.5- 2.7
Slides: Inconsistent Fit.ppt
Chef Davide Oldani and Ristorante D’O (HBS 613080)
1. How does Chef Davide offer meals at so much lower price (and cost) than other
Michelin starred restaurants?
2. How has Chef Davide changed the cost–quality tradeoffs?
3. Does the new restaurant format make sense from amarketing and strategic point
of view? Is this an example of inconsistent fit?

T. 1/26
3. Topic: The Focused Factory
Review Ch. 2, “Fit” and “Focus: Fit in Small” p. 44-47
Read: Ch. 3-3.3.4
1) Case/Article Integration: How does the reading on the Focused Factory
Idea (p. 44-47) and capacity apply to the Alden Products case?
Slides: Focus.ppt

Alden Products, Inc. European Manufacturing (HBS- 5-699-122)

1. Looking back, do you agree with the logic that led API in 1962 to consolidate its
European (continental) production into a single facility?
2. What is your evaluation of the Uniplant’s performance during the 1980’s?
3. What recommendations would you make to Mr. Gener, API-Europe’s Executive
V.P., as regards the operations strategy his organization should follow in the
future? Specifically, how much additional production capacity should be
provided, where should it be located, and how should it be managed?

6
 Section II.
Designing an Operations Strategy
Module A. Facilities and Process Technology
Th. 1/28

1.Topic: Competition, Manufacturing Strategy and Plant Networks

Read: Ch. 5, especially 5.1-5.3.4
Slides: Designing and Managing Operations Networks.ppt

New Balance Athletic Shoe, Inc. (HBS9-606-094)

1. Evaluate New Balance’s current operations strategy. What are the key decisions
implicit in this strategy?
2. Assuming that the total U.S. market for athletic footwear was 400 million pairs in
2005, how costly was new Balance’s decision to maintain 25% of its
manufacturing in the United States? What is your assessment of that decision?
3. How should the Davises react to Adidas’ planned acquisition of Reebok? What
aspects of New Balance’s operations strategy should they change?
4. Moving forward, how important is the NB2E initiative for new Balance?

T. 2/2
2. Topic: Mode of Entry to New Markets and Plant Networks
Read: Ch. 5, especially 5.1-5.3.4
Ben Gomes-Casseres “Managing International Alliances:Conceptual Framework” –
(792122-PDF-ENG)
Ferdows-Intl Framework.pdf

Lincoln Electric (HBS 9-707-445)

1) Put yourself in CEO John Stropki’s shoes. Should Lincoln Electric expand into
India by investing in a major production facility there?
2) If you were to expand into India, would you enter through acquisition, a
Greenfield site, or some type of joint venture? Which factors would inform your
decision among these entry mode choices?
3) In which countries is Lincoln Electric likely to be most successful or least
successful? Why? How would this guide your own choice of where to place
Lincoln Electric’s production facilities abroad?
4) When Lincoln Electric goes to India and other countries, what factors should
determine how much it adapts its core incentive pay-for-performance
management practices to local labor market norms? Should Lincoln Electric
follow the adage “when in Rome, do as the Romans do,” or should it seek to
always replicate the recipe behind its success in the home plant in Cleveland?

7
Th. 2/4

3. Topic: Global Network of Plants

2) Case/Article Integration: The Bartmess and Cerny article discusses a
capability oriented view of plant locations that it says is different than the
traditional orientation in plant location. How does the article help you
understand the choice of location in Hungary in the Coloplast case? How does it
help management as they consider establishing production in China?
Coloplast A/S – Organizational Challenges in Offshoring (Ivey 908M31)
Read: “Building a Competitive Advantage Through a Global Network of
Capabilities,” A D Bartmess, and K Cerny (CMR 040).
Slides: NetworkCapabilities.ppt
1. What were the main factors determining the choice of location in Hungary?
2. What are the arguments for offshoring versus outsourcing?
3. Identify and discuss the challenges associated with knowledge transfer between
the Danish headquarters and the Hungarian production subsidiary.
4. How did relocation of production to Hungary influence Coloplast’s
organization?
a. Why are standardization and structured interfaces among the value-chain
activities so important?
b. What determined the configuration of Coloplast’s global value chain?

5. What are the organizational challenges facing Coloplast if they want to establish
production in China?

Section II.
Designing an Operations Strategy
Module B. Infrastructure: Systems and Organizational Processes

T. 2/9
1.Topic: Different Organizational Approaches to Improvement
Raychem Corporation: Interconnection Systems Division (HBS 694063)
Read: Ch. 10.7-10.8.5, A Framework for Improvement
Read: Dauch, American Drive, Ch. 8, “Lean Manufacturing”
Read: Lean Thinking vs Muda.pdf
Sldes: Lean Thinking.ppt

1. Imagine that your first job was in a manufacturing company whose plant looked
a lot like Raychem’s plant in 1990, and that your boss asked you to take charge
of an effort to implement a just-in-time production system. What would you
do?

8
 2. What is it about manufacturing cells and just-in-time systems that enables the
sort of overhead cost reduction that Raychem was able to achieve?
3. How would you characterize the path to performance improvement that was
pursued by the previous ICD management team, compared to the path Marsland
and Vrcelj followed?
4. If you were Vcrelj, what would you do to reduce the long lead times from
tooling vendors?
5. Which of the strategic options outlined at the end of the case do you think ICD
should pursue?

Th. 2/11

2. Stermon Mills Incorporated (HBS 693053)

Topic: Flexibility: Definition, Implementation, and Measurement
Read: Upton, “What really makes factories flexible?”(HBR 95410);
Ch. 9.3.7-9.3.8 “Evaluating and Justifying Capital Investments”
Slides: Flexibility.ppt (on Brightspace after class)
1. Evaluate the strategic and (where possible) the financial implications of the four
flexibility improvement options being presented to Stan Kiefner.
2. What recommendation would you make to Mr. Kiefner? On what basis would
you try to persuade him that your proposal is best for Stermon Mills?
3. How will you know if Stermon has made progress on its manufacturing
flexibility improvement plan?

T. 2/16

3. Topic: Interaction of Product and Process Development

BMW: The 7-Series Project (A)(HBS 692083)
Read: Ch. 7.4-7.5
Video: ( youtube) Dick Dauch’s “American Drive”- Autoline This Week 1712
https://www.youtube.com/watch?v=b4jd_yiNZyo

Read: Dauch, American Drive, Ch. 15, “Passion for Perfection-Quality”

1. What are the causes and consequences of BMW’s quality problems with newly
launched products? What should be done to improve “launch quality?”
2. What are your recommendations to Carl-Peter Forster concerning the 7-series
prototypes? What should he do regarding future development projects?

9
 3. What changes would you recommend in the way BMW develops new models?
What attributes of newly launched products would you expect to improve as a
result of these recommendations? Which attributes might deteriorate?
4. What recommendations would you make to Chairman von Kuenheim regarding
BMW’s strategy to compete against new Japanese entrants into the luxury car
market?

Th. 2/18
4. Topic: Product Development, Production Processes and Project Management
Case: We’ve Got Rhythm! Medtronic Corp.’s Cardiac Pacemaker Business (9-698-004)
Read: Ch 8.1-8.5
Slides: Framework for Improvement.ppt
Project Execution and Project Management.ppt

1. How has Medtronic reversed its steep decline in market share?

2. What are the principles it has developed for new product development at the
firm?
3. How does this change the management of multiple projects in general for the
firm, and how does it affect outcomes within projects?

Section III
Selecting, Developing and Exploiting Operation Capabilities
Module A. Selecting Capabilities and Drawing Organizational Boundaries

T. 2/23
1.Topic: Outsourcing and Supplier Relationships
Read: Ch. 4, “Determining Organizational Boundaries: Vertical Integration and
Outsourcing”
Slides: Vertical Integration and Outsourcing.ppt

VF Brands: Global Supply Chain Strategy (HBS 9-610-022)

1. Why is VF Brands considering a change from its current sourcing approach?
2. Why had the current approach been so successful and what are its limitations?
3. What advantages does VF Brands have in its internal production?
4. Would you advise them to continue with the “third way” approach to sourcing?
How would you leverage it further?

10
Th. 2/25

Topic: Outsourcing and Contract Manufacturing

Slides: Coordination and Vertical Integration Decisions.ppt
2. Flextronics International, Ltd. (HBS 605-073)
1. What factors account for the dramatic growth of the electronics manufacturing
services (EMS) industry during the 1990’s? How would you rate Flextronics’
performance during this period?
2. Does the economic or strategic rationale for the outsourcing of electronics
manufacturing differ from that for the outsourcing of design? If so, what is
different?
3. Do you believe that moving into the ODM market is a good idea for
Flextronics? If yes, explain your rationale and decide whether you would grant
an exclusive relationship for Phone 4. If not, what alternate strategy would you
recommend?

Section III.
Selecting, Developing and Exploiting Operation Capabilities
Module B. Developing and Leveraging Capabilities
T. 3/2

1. Topic: Leveraging Existing Capabilities and Developing New Ones

Read: Ch. 10.1-10.5, Driving Operations Improvement and
Ch. 10.6. Breakthrough vs. Incremental Improvement
Slides: WithinvsAcrossGroupImprovement.ppt
Slides: Breakthrough vs. Incremental Improvement

3) Case Article Integration: How does the reading on breakthrough vs. incremental
innovation help understand the dilemma at Nypro for what to do with the Novaplast
technology? Think carefully about the nature of the technology, the history of what
Nypro does well and how you can use both to evaluate and make your
recommendation.

Case: Managing Innovation at Nypro (9-696-061)

1. How would you characterize Lankton’s mental model of his business, and how
does his model contrast with the mental models that other managers have
demonstrated in the cases we have studied?
2. What is the process employed at Nypro to identify and standardize important
innovations?

11
 3. Can you make any generalizations about what sorts of innovations are likely to
thrive within Nypro’s “internal marketplace” for technologies? What sorts of
innovations are likely to languish?
4. How should Lankton roll out the Novaplast technology?

Th. 3/4

2. Topic: Summary and Review

Read: Ch. 11, Guiding the Pursuit of an Operations Edge
Read: Restoring American Competitiveness by Pisano and Shih, (HBR R09075)
Read: Does America Really Need Manufacturing? (10345-HBK-ENG)
Slides: Guiding the Pursuit of an Operations Edge.ppt
Restoring American Competitiveness.ppt
Does America Really Need Manufacturing?.ppt

12