Module 2

2.1. Product Strategy and Integrated Product Development

Product Strategy

A product strategy is a high-level plan describing what a business hopes to accomplish

with its product, and how it plans to do so. This strategy should answer key questions
such as who the product will serve (personas), how it will benefit those personas, and
what are the company’s goals for the product throughout its lifecycle. Product
strategy defines what your product should achieve and how that supports the
organisation,

Importance of product strategy

It provides clarity for your company.

It helps you prioritize your product roadmap.

It improves your team’s tactical decisions.

Key Components of a Product Strategy

Product management expert Roman Pilcher suggests a product strategy should contain
three key elements:

 The market for the product and the specific needs it will address.
 The product’s key differentiators or unique selling proposition.
 The company’s business goals for the product.

Integrated Product Development (IPD)

Integrated Product Development (IPD) is based on the integrated design of products

and manufacturing and support processes. ... These approaches extend design cycle
time, increase product development cost, and may not result in the most optimum way
to produce and support the product.
2.2 Process Strategy Capacity Planning Decisions Facilities Location
Strategies.

(Refer PPT too)

Process strategy
A process (or transformation) strategy is an organization’s approach to transforming
resources into goods and services.
The objective of a process strategy is to build a production process that meets customer
requirements and product specification within cost and other managerial constraints.

The process selected will have a long-term effect on efficiency and flexibility of
production as well as on cost and quality of the goods produced. Therefore, the
limitations of a process strategy are at the time of the process decision.

In understanding Process strategy there are three principles that are particularly
important:
  The key to successful process decisions is to make choices that fit the
situation. They should not work at cross-purposes, with one process
optimized at the expense of other processes. A more effective process is one
that matches key process characteristics and has a close strategic fit.
 Individual processes are the building blocks that eventually create the
firm’s whole supply chain.
 Management must pay close attention to all interfaces between
processes in the supply chain, whether they are performed internally or
externally.
It can be utilized to guide a variety of process decisions, operations strategy, and your
business’ ability to obtain the resources necessary to support them.

A process involves the use of an organization’s resources to provide something of

value.
Major process decisions include:
1. Process Structure determines how processes are designed relative to the
kinds of resources needed, how resources are partitioned between them, and
their key characteristics.
2. Customer Involvement refers to the ways in which customers become part
of the process and the extent of their participation.
It is Manager’s job to assess whether the advantages outweigh disadvantages, judging
them in terms of the competitive priorities and customer satisfaction. Customer
involvement is not always the best option as there are disadvantages commonly
associated with it.  For example, allowing customers to play an active role in a service
process can be disruptive thereby making the process less efficient.

Quality measurement also becomes more difficult to manage.

Additionally, customer involvement in processes can also mean greater expenses for
your business as you will require employees with greater interpersonal skills and
possibly consider revising your facility layout. However, despite these possible
disadvantages, the advantages of a more customer-focused

Customer involvement process might increase the net value to your customer. Some
customers seek active participation in and control over the service process, particularly
if they will enjoy savings in both price and time. More customer involvement can mean
better quality, faster delivery, greater flexibility, and even lower cost.

1. Resource flexibility is the ease with which employees and equipment can
handle a wide variety of products, output levels, duties, and functions.

We consider resource flexibility mainly at two levels:

 Workforce
One of the decisions and operations manager has to make is whether or not to have a
flexible workforce, that is, employees that are capable of doing many tasks.

The type of workforce you require is also dependent on the need for volume flexibility.
For example, when conditions allow for a smooth, stead rate of output, the likely choice
is a permanent workforce that expects regular full-time employment.
Alternatively, if the process is subject to hourly, daily, or seasonal peaks and valleys in
demand, the use of part-time or temporary employees to supplement a smaller core of
full-time employees may be the best solution

 Equipment
When a firm’s product or service has a short life cycle and a high degree of
customization, low production volumes mean that a firm should select flexible,
inexpensive, general-purpose equipment. When volumes are low, the low fixed cost
more than offsets the higher variable unit cost associated with this type of equipment. 
Conversely, specialized, higher-cost equipment is the best choice when volumes are
high and customization is low. Its advantage is low variable unit cost

2. Capital intensity is the mix of equipment and human skills in a process. 

It is calculated:   total assets of a company/sales of the company.

A higher capital intensity ratio for a company means that the company needs more
assets than a company with lower ratio to generate equal number of sales. A high capital
intensity ratio may due to lower utilization of the company’s assets or it may be because
the company’s business is more capital intensive and less labour intensive (for example,
because it is automated). However, for companies in the same industry and following
similar business model and production processes, the company with lower capital
intensity is better because it generates more revenue using less assets.

There are four process strategies:

 Process Focus
 Repetitive Focus
 Product Focus
 Mass Customization
Capacity planning

Capacity planning is central to the long-term success of an organisation. Capacity plans

are made at two levels:

(i) Long-term capacity plans which deal with investments in new facilities and
equipment covering the requirements for at least two years into the future.

(ii) Short-term capacity plans which focus on work-force size, overtime budgets,
inventories etc.

Long-Range Capacity Planning

A long-term strategic decision that establishes a firm’s overall level resources.

Three major capacity decisions are:

i. How much capacity to be installed,

ii. When to increase capacity and
iii. How much to increase.

Types of Capacity

• Production capacity: Maximum rate of production or output of an organisation.

• Design capacity: The maximum output that can possibly be attained.
• Effective capacity: The maximum output given a product mix, scheduling
difficulties, machine maintenance, quality factors, absenteeism etc.
 • Maximum capacity: The maximum output that a facility can achieve under ideal
conditions. Also known as peak capacity.

Developing Capacity Alternatives

To enhance capacity management, the following approaches to capacity alternatives

could be developed:

i. Designing flexibility into the system.

ii. Differentiating between new and mature products or services.
iii. Taking a “big-picture” approach to capacity changes.
iv. Preparing to deal with “chunks” of capacity.
v. Attempting to smooth out capacity requirements.

2.3 Systems: Aggregate planning and Master Scheduling, MRP, CRP

Refer PPT and Notebook

Aggregate Planning

•Aggregate planning involves planning the best quality to produce in the intermediate-
range horizon (3 months to one year)

•Aggregate production planning is the process of determining output levels of product

groups over the next 6 to 18 months period.

Objectives of Aggregate Planning

I. The overall objective is to balance conflicting objectives involving customer service,

work force stability, cost and profit.

II. To establish company-wide strategic plan for allocating resources.

III. To develop an economic strategy to meet customer demand.

Inputs to and Outputs from Aggregate Production Planning

Aggregate Planning or Aggregate Capacity Planning

  Need for Aggregate Capacity Planning

1.It facilitates fully loaded facilities and minimizes overloading and underloading and
keeps production costs low.

2.Adequate production capacity is provided to meet expected aggregate demand.

3.Orderly and systematic transition of production capacity to meet the peaks and
valleys of expected customer demand is facilitated.

Steps in Aggregate Capacity Planning

 Determine the demand (i.e., sales forecast) for each product for each time period
(i.e., weeks or months or quarters) over the planning horizon (6 to 12 months).
 Determine the aggregate demand by summing up the demand for individual
products.
 Transform the aggregate demand for each time period into workers, materials,
machines required to satisfy aggregate demand.
 Identify company policies that are pertinent (e.g., policy regarding safety stock
maintenance, maintaining stable workforce etc.).
 Determine unit costs for regular time, overtime, subcontracting, holding
inventories, back orders, layoffs etc.
 Develop alternative resource plans for providing necessary production capacity
to support the cumulative aggregate demand and compute the cost of each
alternative plan.
 Select the resource plan from among the alternatives considered that satisfies
aggregate demand and best meets the objectives of the firm.
 Approaches to Aggregate Planning

a. Top-down approach

i. A bottom-up approach or subplan consolidation approach

ii. Rough-cut Capacity Planning

This is done in conjunction with the tentative master production schedule to test its
feasibility in terms of capacity before the master production schedule (MPS) is finalised.

Capacity Planning and Capacity Requirement Planning (CRP)

Production capacity is defined as the maximum production rate of a facility or a plant.

 Types of Capacity

1.Fixed capacity: In fixed-capacity models, there is an inflexible limit on the overall rate
of information processing that persists as attention is divided over multiple stimuli.

2.Adjustable capacity: it is to adjust the capacity of the process against the load which
cannot be handled only by equalizing the load such as loading and levelling.

3.Design capacity: Design capacity is the maximum output of a structure, facility,

process, machine, tool or component based on its design.

4.System capacity: System Capacity means the system's operational, technical,

managerial and financial capability to achieve and maintain compliance with all
relevant local, state, and federal plans and regulations

5.Potential capacity: It is for the long term and indicates the available capacity at hand
which can be utilised to influence the planning of senior management

6.Immediate capacity: It is the maximum available capacity which can be utilised in the
short term

7.Effective capacity: It is the part of the total available capacity which can actually be put
into use.

8.Normal capacity or rated capacity: is the production achieved or achievable on an

average over a period or season under normal circumstances taking into account the
loss of capacity resulting from planned maintenance.

9.Actual or utilised Capacity Planning: This is the same as effective capacity but contains
unplanned losses as well as planned ones. These could include poor work rate,
absenteeism or new staff training for example.

Capacity planning involves activities such: as

1.Assessing existing capacity

2.Forecasting future capacity needs

3.alternative ways to modify capacity

4. financial, economic and technological capacity alternatives

Selecting a capacity alternative most suited to achieve the strategic mission of the firm.
Capacity planning involves capacity decisions that must merge consumer demands with
human, material and financial resources of the organization

4 Types of Capacity Planning are:

• Long term Capacity Planning

• Short-term Capacity Planning

• Finite Capacity Planning

• 4Infinite Capacity Planning.

Two categories of factors affecting capacity planning are:

• Controllable Factors

• Less Controllable Factors.

• Capacity Requirement Planning (CRP): A technique to determine the labour and

equipment capacities needed to meet the objectives. Capacity Requirement Planning
(CRP) Process

Material requirements planning I

Material requirements planning (MRP) is a production planning, scheduling, and

inventory control system used to manage manufacturing processes. Most MRP systems
are software-based, but it is possible to conduct MRP by hand as well.

An MRP system is intended to simultaneously meet three objectives:

• Ensure raw materials are available for production and products are available for
delivery to customers.

• Maintain the lowest possible material and product levels in store

• Plan manufacturing activities, delivery schedules and purchasing activities.

The scope of MRP in manufacturing: Manufacturing organizations, whatever their

products, face the same daily practical problem - that customers want products to be
available in a shorter time than it takes to make them. This means that some level of
planning is required. Companies need to control the types and quantities of materials
they purchase, plan which products are to be produced and in what quantities and
ensure that they are able to meet current and future customer demand, all at the lowest
possible cost. Making a bad decision in any of these areas will make the company lose
money.

A few examples are given below:

• If a company purchases insufficient quantities of an item used in manufacturing, or the

wrong item, they may be unable to meet contracts to supply products by the agreed
date.

• If a company purchases excessive quantities of an item, money is being wasted - the

excess quantity ties up cash while it remains as stock and may never even be used at all.
This is a particularly severe problem for food 1 manufacturers and companies with very
short product life cycles. However, some purchased items will have a minimum quantity
that must be met, therefore, purchasing excess is necessary.

• Beginning production of an order at the wrong time can cause customer deadlines to
be missed

Manufacturing Resource Planning (MRP II)

Manufacturing Resource Planning (MRP II) is an integrated information system used by

businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials
Requirement Planning (MRP) systems by including the integration of additional data,
such as employee and financial needs.

The system is designed to centralize, integrate, and process information for effective
decision making in scheduling, design engineering, inventory management, and cost
control in manufacturing.

Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP),
which is a process whereby a company, often a manufacturer, manages and integrates
the important parts of its business.

An ERP management information system integrates areas such as planning, purchasing,

inventory, sales, marketing, finance, and human resources. ERP is most frequently used
in the context of software, with many large applications having been developed to help
companies implement ERP.

Enterprise Resource Planning (ERP)?

Enterprise resource planning (ERP) is a process used by companies to manage and

integrate the important parts of their businesses. Many ERP software applications are
important to companies because they help them implement resource planning by
integrating all of the processes needed to run their companies with a single system. An
ERP software system can also integrate planning, purchasing inventory, sales,
marketing, finance, human resources, and more.

2.4 Facilities Layout and Material Handling Strategy

Facility layout

For an organization to have an effective and efficient manufacturing unit, it is important

that special attention is given to facility layout. Facility layout is an arrangement of
different aspects of manufacturing in an appropriate manner as to achieve desired
production results. Facility layout considers available space, final product, safety of
users and facility and convenience of operations.

An effective facility layout ensures that there is a smooth and steady flow of production
material, equipment and manpower at minimum cost. Facility layout looks at physical
allocation of space for economic activity in the plant. Therefore, main objective of the
facility layout planning is to design effective workflow as to make equipment and
workers more productive.

Facility Layout Objective

A model facility layout should be able to provide an ideal relationship between raw
material, equipment, manpower and final product at minimal cost under safe and
comfortable environment. An efficient and effective facility layout can cover following
objectives:
  To provide optimum space to organize equipment and facilitate movement of
goods and to create safe and comfortable work environment.
 To promote order in production towards a single objective
 To reduce movement of workers, raw material and equipment
 To promote safety of plant as well as its workers
 To facilitate extension or change in the layout to accommodate new product line
or technology upgradation
 To increase production capacity of the organization

An organization can achieve the above-mentioned objective by ensuring the following:

 Better training of the workers and supervisors.

 Creating awareness about of health hazard and safety standards
 Optimum utilization of workforce and equipment
 Encouraging empowerment and reducing administrative and other indirect work

Factors affecting Facility Layout

Facility layout designing and implementation is influenced by various factors. These

factors vary from industry to industry but influence facility layout. These factors are as
follows:

 The design of the facility layout should consider overall objectives set by the
organization.
 Optimum space needs to be allocated for process and technology.
 A proper safety measure as to avoid mishaps.
 Overall management policies and future direction of the organization

Design of Facility Layout

Principles which drive design of the facility layout need to take into the consideration
objective of facility layout, factors influencing facility layout and constraints of facility
layout. These principles are as follows:

 Flexibility: Facility layout should provide flexibility for expansion or

modification.
  Space Utilization: Optimum space utilization reduces the time in material and
people movement and promotes safety.
 Capital: Capital investment should be minimal when finalizing different models
of facility layout.

Design Layout Techniques

There are three techniques of design layout, and they are as follows:

1. Two- or Three-Dimensional Templates: This technique utilizes development

of a scaled-down model based on approved drawings.
2. Sequence Analysis: This technique utilizes computer technology in designing
the facility layout by sequencing out all activities and then arranging them in
circular or in a straight line.
3. Line Balancing: This kind of technique is used for assembly line.

Types of Facility Layout

There are six types of facility layout, and they are as follows:

 Line Layout
 Functional Layout
 Fixed Position Layout
 Combined Layout

Line Layout: In Product or Line Layout all machines that are needed to produce a
product are arranged sequentially in a continuous line and the raw materials are fed
into the first machine and the final product comes out of the last machine. Line layout is
used in a number of continuous type of industries such as sugar, paper, cement etc.

In a product layout the whole emphasis is given to the product that is manufactured.
There will be a separate production line for each type of product. The same type of
machines may be arranged differently in different lines. Sometimes, the machines for
each line may also be different.
Functional Layout: A functional layout is a workplace configuration in which
operations/processes are organized by the type of work (function) they do.

Fixed Layout: In a fixed-position layout, the project remains in one place, and workers
and equipment come to that one work area. Examples of this type of project are a ship, a
highway, a bridge, a house, and an operating table in a hospital operating room.

Combined Layout: A combination layout is possible where an item is being made in

different types and sizes. In such cases machinery is arranged in a process layout but
the process grouping (a group of number of similar machines) is then arranged in a
sequence to manufacture various types and sizes of products.

Material Handling

Material handling is the movement, protection, storage and control of materials and

products throughout manufacturing, warehousing, distribution, consumption and
disposal Raw materials form a critical part of manufacturing as well as service
organization. In any organization, a considerable amount of material handling is done in
one form or the other. This movement is either done manually or through an automated
process. Throughout material, handling processes significant safety and health;
challenges are presented to workers as well as management. Therefore, manual
material handing is of prime concern for health and safety professional, and they must
determine practical ways of reducing health risk to the workers.

Manual material handling ranges from movement of raw material, work in progress,
finished goods, rejected, scraps, packing material, etc. These materials are of different
shape and sizes as well as weight. Material handling is a systematic and scientific
method of moving, packing and storing of material in appropriate and suitable location.
The main objectives of material handling are as follows:

 It should be able determine appropriate distance to be covered.

 Facilitate the reduction in material damage as to improve quality.
 Reducing overall manufacturing time by designing efficient material movement
 Improve material flow control
 Creation and encouragement of safe and hazard-free work condition
  Improve productivity and efficiency
 Better utilization of time and equipment

It is critical for manufacturing organization to identify importance of material handling

principle as the critical step in promoting the job improvement process. Manual
material handling significantly increases health hazard for the workers in from lower
back injuries.

In the current competitive and globalized environment, it is important to control cost

and reduce time in material handling. An efficient material handling process promotes:

 Design of proper facility layout

 Promotes development of method which improves and simplifies the work
process
 It improves overall production activity.
 Efficient material handling reduces total cost of production.

Principles of Material Handling

Material handling principles are as follows:

 Orientation Principle: It encourages study of all available system relationships

before moving towards preliminary planning. The study includes looking at
existing methods, problems, etc.
 Planning Principle: It establishes a plan which includes basic requirements,
desirable alternates and planning for contingency.
 Systems Principle: It integrates handling and storage activities, which is cost
effective into integrated system design.
 Unit Load Principle: Handle product in a unit load as large as possible
 Space Utilization Principle: Encourage effective utilization of all the space
available
 Standardization Principle: It encourages standardization of handling methods
and equipment.
 Ergonomic Principle: It recognizes human capabilities and limitation by design
effective handling equipment.
  Energy Principle: It considers consumption of energy during material handling.
 Ecology Principle: It encourages minimum impact upon the environment
during material handling.
 Mechanization Principle: It encourages mechanization of handling process
wherever possible as to encourage efficiency.
 Flexibility Principle: Encourages of methods and equipment which are possible
to utilize in all types of condition.
 Simplification Principle: Encourage simplification of methods and process by
removing unnecessary movements
 Gravity Principle: Encourages usage of gravity principle in movement of goods.
 Safety Principle: Encourages provision for safe handling equipment according
to safety rules and regulation
 Computerization Principle: Encourages of computerization of material
handling and storage systems
 System Flow Principle: Encourages integration of data flow with physical
material flow
 Layout Principle: Encourages preparation of operational sequence of all
systems available
 Cost Principle: Encourages cost benefit analysis of all solutions available
 Maintenance Principle: Encourages preparation of plan for preventive
maintenance and scheduled repairs
 Obsolescence Principle: Encourage preparation of equipment policy as to enjoy
appropriate economic advantage.

Material handling operations are designed based upon principles as discussed above.
Material handling equipment consists of cranes, conveyors and industrial trucks.

2.5 Group Technology Flexible in a manufacturing system

Flexible in a manufacturing system
When speaking in the context of manufacturing, flexibility is a catch-all term that's used
to describe a manufacturing system's ability to make adjustments to better handle
nuances like mixed parts, variations in assembly, variations in process sequence,
production volume changes, design changes, and other changes.

Types of FMS :

The different types of FMS are :

1. Sequential FMS

2. Random FMS

3. Dedicated FMS

4. Engineered FMS

5. Modular FMS

 Sequential FMS : It manufactures one-piece part batch type and then planning
and preparation is carried out for the next piece part batch type to be
manufactured. It operates like a small batch flexible transfer line.
 Random FMS : It manufactures any random mix of piece part types at any one
time.
 Dedicated FMS :It continually manufactures, for extended periods, the same but
limited mix of piece part batch types.
 Engineered FMS :It manufactures the same mix of part types throughout its
lifetime.
 Modular FMS :A modular FMS, with a sophisticated FMS host, enables and FMS
user to expand their FMS capabilities in a stepwise fashion into any of the
previous four types of FMS.