MMVA ZG512 Manufacturing

Strategy
Rajiv Gupta
BITS Pilani
Session 9
 Session 9
• Module 1
– Recap of the first half of the term
• Module 2
– Competing Through Manufacturing
• Module 3
– Transitioning Through the Stages 1-3
• Module 4
– Jump to Stage 4
• Module 5
– Summary and Wrap-up

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 Session 9
• Begin Module 1
– Recap of first half of the term

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Recap of First Half of The Term
• In the first half of the term we laid the
groundwork to understand what is strategy and
the role of manufacturing in the context of the
business strategy as well as the other functional
strategies
• We considered the structure of the competitive
marketplace using Porter’s 5 Competitive Forces
• We discussed the 3 Generic Strategies of Porter
to understand the nature of choices to be made.

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Recap of First Half of The Term
• We discussed the Focused Factory in the context of
multiple outputs required from a manufacturing
organization
• The volume-variety vs. layout matrix was introduced
to relate the type of layout and manufacturing
system to the specific product characteristics
• The volume-variety/layout matrix was also linked to
the product life cycle
• We discussed the BCG matrix

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 Session 9
• End of module 1

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 Session 9
• Begin Module 2
– Competing Through Manufacturing

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 Competing Through
Manufacturing
• We had started discussing the article by Steven C.
Wheelwright and Robert H. Hayes titled “Competing
Through Manufacturing.”
• The article discusses four different phases a
company may pass through, each representing a
different level of engagement of the manufacturing
function in the generation of the strategy.
• It provides a way to understand the steps in truly
bringing manufacturing in line with other functions
when developing the business strategy.

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 Competing Through
Manufacturing
• The Stages in Manufacturing’s Strategic Role
are:
– Stage 1 in which we minimize manufacturing’s
negative potential, i.e. “Internally Neutral”
– Stage 2 in which we achieve parity with competitors,
i.e., “Externally Neutral”
– Stage 3 in which manufacturing provides credible
support to the business strategy, i.e., “Internally
Supportive”
– Stage 4 in which we pursue a manufacturing-based
competitive advantage, i.e., “Externally Supportive”
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 Difference Between the Stages
Stages 1-3, Stage 4, Broad Potential
TraditionalStatic Dynamic
• Command and control • Learning
• Management of effort • Management of attention
• Coordinating • Problem solving
• Direct, supervisory control • Indirect (systems and
• Process stability values) control
• Process evolution

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 Difference Between the Stages
• Although there are significant differences
between each of the stages 1-3, primarily it
requires improving what managers have been
doing, without necessarily bringing about a
radical change in their thinking or philosophy
• Stage 4, on the other hand, requires more than
traditional management thinking. It is a major
overhaul of the way in which the company looks
at manufacturing and also how manufacturing
views itself.
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 Difference Between the Stages
• Companies in Stages 1-3 typically tend to use
the command and control method to run the
organization.
• People are not expected to think and question
management policies.
• The expected contribution of the workforce
towards the success of the company is only in
meeting the targets set for them.

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 Difference Between the Stages
• Companies in Stage 4 actually engage all
employees, especially the manufacturing
personnel and workers in an effort to leverage
the combined knowledge and ability of the
organization.
• This requires management to take a very
different stance with regard to their own role.
They no longer are expected to have all the
answers. They need to lead the effort toward
creative experimentation and learning by all.
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 Difference Between the Stages
• Managers in companies in Stages 1-3 typically
are concerned with ensuring that the costs are
kept low.
• Their focus is on physical efforts required and
they try to ensure that efforts are not wasted
• Managers in Stage 4 companies definitely are
concerned with costs. But their focus is not
limited to physical efforts, but also on the
creativity of the individuals of the organization.

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 Difference Between the Stages
• In Stages 1-3, most of the effort of people, including
management is one of coordination, i.e., ensuring
that information is correctly communicated and that
efforts on the shop floor match what marketing
wants
• No effort is required to explore new horizons by
considering the possibility of new ways of doing the
tasks better or one of problem solving.
• In Stage 4, the effort is to learn how to work in
teams and to be able to come up with new methods
and solve problems with creativity.
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 Difference Between the Stages
• In Stages 1-3, there is direct supervisory control to
ensure that the activities of the different functional
areas are as per plan.
• This requires more time and effort on the part of
managers/supervisors with less value added
• In Stage 4, the control is more indirect, i.e.,
managers try to work on the systems and the values
of the organization.
• With systems in place, and workers understanding
the values of management, less time and effort is
required of management. More value added.
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 Difference Between the Stages
• In Stages 1-3, the primary concern of management
is the maintenance of stability of the system.
• Processes are expected to maintain output and
capability. There is little focus to improve the
processes.
• In Stage 4, processes are dynamic. Management is
constantly asking for improvements in the processes
in order to improve the competitive position of the
organization.
• This is typically done with the help of the entire
workforce.
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 Session 9
• End of module 2

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 Session 9
• Begin Module 3
– Transitioning Through The Stages 1-3

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 Typically Where Do New
Companies Start?
• Most of the time, new companies tend to start in
Stage 1 or 2
• The reason for this because the main reason why
a new company starts operations is because they
feel they have a winning product or service.
• Because of this the focus of the company is on R
& D and on marketing.
• Also, senior managers have little knowledge about
manufacturing, unless they come from a
manufacturing background.
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 Typically Where Do New
Companies Start?
• The main role seen for manufacturing is to
deliver what has been designed and planned.
• Senior managers do not make much effort to
understand or pay close attention to
manufacturing, as long as it delivers what is
expected of it.

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 Transition Stage 1-2
• Companies starting in Stage 1 or 2 will tend to be
comfortable as long as their product novelty protects
them from strong competition.
• In the US, this was one major reason why in the post
WWII era, most manufacturers developed a tendency to
rest on their laurels and did not see the potential threat
from overseas competitors, until it was too late.
• The growth in consumer demand through the 1960s only
reinforced their beliefs and caused them to become
oblivious to potential threats from competition, especially
from overseas.

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 Transition Stages 1 and 2
• By the time the US manufacturers woke up to the
threat after the oil shock of the 1970s, the foreign
competitors had developed quality products that the
customers wanted as well as a manufacturing edge,

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 Transition Stages 1 and 2
• The transition from Stage 1 to Stage 2 takes place
by solving production problems by using proven
practices. No new solutions are sought.
• Sometimes the inducement to make a change may
come from the observation that some of the leading
companies have created an advantage for
themselves by using some aspect of manufacturing.
• However, the transition is not seen as a major step.
In fact the management may not be aware that a
change in their approach has even occurred.

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 Transition to Stage 3
• However, the transition from Stage 2 to Stage 3
requires that the management begin to question the
applicability of their traditional approaches and
solutions.
• Also management may become aware of new
developments in technologies and the benefits they
may provide.
• It is clear to the management that competition has
intensified and will require some new approach to
gain/regain an edge in the competitive environment.

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 Transition to Stage 3
• In the early 1980s US auto industry was in a state of
panic.
• Dr. Deming, who had been ignored for nearly 50
years by major U.S. industries became in high
demand.
• The initial denial by the U.S. auto industry that the
Japanese competition was due to cultural
differences gave way to the realization that there
was a significant change that had taken place in
manufacturing which they had ignored.

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 Transition to Stage 3
• Although companies have a real threat that drives
them to look at the transition to Stage 3, not many
companies are able to make the transition, or to
sustain it.
• The reason for this is that once the threat of the
competition abates, the companies will have a
tendency to revert back to Stage 2.
• Early success in the transition can lull the
management of a company into complacency.
• Also, successful managers get promoted leaving a
vacuum behind.
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 Session 9
• End of module 3

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 Session 9
• Begin Module 4
– The Jump to Stage 4

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 Jump to Stage 4
• The transitions from Stage 1 to Stage 2 and from
Stage 2 to Stage 3 are not easy.
• However the changes were restricted largely to
the manufacturing function.
• It was seen as a way to solve problems of lack
of competitiveness in manufacturing.
• There was no reason seen for large scale
organizational changes.

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 Jump to Stage 4
• The chances are that senior management did
not necessarily see their role in the changes up
to Stage 3
• The move to from Stage 3 to Stage 4 requires a
complete rethink with regard to the role of
manufacturing and that of all the other functions.
• Such radical change in thinking does not come
easily.
• Relatively very few understand the need for the
change and can make it.
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 Jump to Stage 4
• Up to Stage 3 the role of manufacturing was
reactive, not participative
• Any changes in technology were seen narrowly
as a way to improve manufacturing efficiency or
capability
• Stage 4 requires the manufacturing system and
abilities as strengths to be leveraged
• A new self-image and that in relation to the rest
of the organization

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 Requirements of Stage 4
• Senior management must
– Understand the manufacturing function
– Be able to see how manufacturing capability
translates into competitive advantage
– Understand the interrelationships among
manufacturing and other functions
– See manufacturing as more than a way to
reduce cost, e.g., automation for manpower
reduction vs. quality
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 Stage 4
• Few managers are willing to take the risk
• Few managers understand manufacturing or its
relationships
• Few managers see the need to go beyond
Stage 3 – 90% benefits achieved
• Time and effort taken may deter managers
looking for a quick promotion
• GM tinkered with Stage 2 and Stage 3 during the
1990s and early 2000s leading to Chapter 11.

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 Stage 4
• Indicators of movement to Stage 4
– The amount of ongoing in-house innovation
– The extent to which a company develops its
own manufacturing equipment
– The attention paid to manufacturing
infrastructure
– The link between product design and
manufacturing process design

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 Session 9
• End of module 4

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 Session 9
• Begin Module 5
– Summary and wrap up

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 Summary
• In this class we discussed the article on
“Competing Through Manufacturing”
• The four stages of integrating manufacturing into
the business strategy were introduced in the last
class
• The particular differences in management
approach and thinking in the four stages was
discussed bringing out the difference between
Stage 4 and the other 3 stages

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 Summary
• The transition from each of the stages to the
next stages was covered with some examples

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 Session 9
• End Module 5
– Summary and wrap up

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