5.

Focused Manufacturing

Manufacturing is the most complex activity in the organization. The conventional factory
attempts to do too many conflicting production tasks within one inconsistent set of
manufacturing policies. The chief result is that the plant is likely to be noncompetitive because
its policies are not focused on the one key manufacturing task essential to successfully
competing in its industry.

The prime responsibility of the corporate body is to manage manufacturing function

successfully, in order to meet corporate objectives. Manufacturing is essentially complex
because of the size of the task in terms of the number of aspects and issues involved, the
interrelated nature of these and the level of fit between the manufacturing strategy task and the
internal process capability and infrastructure.

These complexities arise due to actions by corporate strategy and can be largely controlled by
corporate strategy decisions made within the business itself. Focused manufacturing, deals with
the issue of linking an organization’s manufacturing facilities to the appropriate competitive
factors of its business (es) with the aim of enabling that company to gain a greater control of its
competitive position. Due to changing requirements in the market place, manufacturing facility
has to respond to these different demands, which is the root cause for making manufacturing
operation to become very complex.

The conventional factory attempts to do too many conflicting production tasks within one
inconsistent set of manufacturing policies. The chief result is that the plant is likely to be
noncompetitive because its policies are not focused on the one key manufacturing task essential
to successfully competing in its industry. In the concept of focused manufacturing, it stops
compromising each element of the production system and to build on competitive strength.
Michael Porter’s generic Strategies:

 Cost leadership
 Differentiation
 Focus

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm
can achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.
2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation
focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on
differences between a focuser's target segment and other segments in the industry. The target
segments must either have buyers with unusual needs or else the production and delivery system
that best serves the target segment must differ from that of other industry segments. Cost focus
exploits differences in cost behaviour in some segments, while differentiation focus exploits the
special needs of buyers in certain segments.
Porter’s Generic Strategies answers to one of two central questions with regard to competitive
strategy. The first question is about the attractiveness of industries for long-term profitability and
how to choose which industry to enter as a company. Framework that Porter came up with to
determine this: Porter’s Five Forces Model.

The second question is about the determinants of a company’s relative competitive position in an
industry after a certain industry is chosen to enter. Because, in order to be a successful company,
being active in an attractive industry alone is not enough: you will need to acquire a dominant
competitive position by choosing among three generic strategies: Differentiation, Cost
Leadership and Focus. Failing to choose between one of these strategies will result in strategic
mediocrity and below-average performance, or as Porter describes it: ‘being stuck in the middle’.

Learning to focus each plant on a limited, concise, manageable set of products, technologies,
volumes and markets. Learning to structure basic manufacturing policies and supporting
services so that they focus on one explicit manufacturing task instead of on many inconsistent,
conflicting, implicit tasks.

Principle of Economies of Scale in new market environment

The principle of economies of scale has been the sound and appropriate way of organizing and
managing businesses. In the past markets were characterized by similarity, but in today’s market
situation is characterized by difference. Hence the advantages gained by applying the principle of
economies of scale no longer realized.
Conventional manufacturing concept

 The conventional factory produces many products for variety of markets thereby
demanding the performance of a multiplicity of manufacturing tasks all at once from one
set of assets and people.
 Its rationale is economy of scale and lower capital investment, utilization of capacity. The
chief result is that the plant is likely to be noncompetitive because its policies are not
focused on the one key manufacturing task essential to successfully competing in its
industry.

Focused manufacturing concept

 Focused manufacturing plants are rare. A factory that focuses on a narrow product mix
for a particular market niche will out perform the conventional plant, which attempts a
broader mission. – (skinner)
 The reason for the above is equipments, supporting systems and procedures can
concentrate on a limited task
 Focusing the demands to which individual facilities must respond can reduce the level of
complexity involved in managing operation and result in improved overall performance
 Cost and overheads are likely to be lower than those of the conventional plants
 Competitive weapon
Basic Concepts

From the study of approximately 50 plants in six industries, can pinpoint three basic concepts
underlying focused manufacturing.

1. There are many ways to compete besides by producing at low cost. This statement may be
self-evident to the reader (particularly, to one in an industry which has been badly hit by low-
priced foreign imports and has been attempting to compete with better products, quality, or
customer service and delivery). Nevertheless, it still needs saying for two reasons.

One is simply the persistent attitude that ways of competing other than on the basis of price are
second best. The other is that a company which starts out with higher manufacturing costs than
its competitors is in trouble regardless of whatever else it does.

While these assumptions may be true of industries with mature products and technologies, they
are not at all true of products in earlier stages of their life cycles. In fact, in many U.S. industries,
companies are being forced to shift to products in which technological innovation in the form of
advanced features is a more critical element of competitive advantage than cost.

2. A factory cannot perform well on every yardstick. There are a number of common standards
for measuring manufacturing performance. Among these are short delivery cycles, superior
product quality and reliability, dependable delivery promises, ability to produce new products
quickly, flexibility in adjusting to volume changes, low investment and hence higher return on
investment, and low costs.

These measures of manufacturing performance necessitate trade-offs—certain tasks must be

compromised to meet others. They cannot all be accomplished equally well because of the
inevitable limitations of equipment and process technology. Such trade-offs as costs versus
quality or short delivery cycles versus low inventory investment are fairly obvious. Other trade-
offs, while less obvious, are equally real. They involve implicit choices in establishing
manufacturing policies.
Within the factory, managers can make the manufacturing function a competitive weapon by
outstanding accomplishment of one or more of the measures of manufacturing performance. But
managers need to know: “What must we be especially good at? Cost, quality, lead times,
reliability, changing schedules, new-product introduction, or low investment?”

Focused manufacturing must be derived from an explicitly defined corporate strategy which has
its roots in a corporate marketing plan. Therefore, the choice of focus cannot be made
independently by production people. Instead, it has to be a result of a comprehensive analysis of
the company’s resources, strengths and weaknesses, position in the industry, assessment of
competitors’ moves, and forecast of future customer motives and behavior.

Conversely, the choice of focus cannot be made without considering the existing factory,
because a given set of facilities, systems, and people skills can do only certain things well within
a given time period.

3. Simplicity and repetition breed competence. Focused manufacturing is based on the concept
that simplicity, repetition, experience, and homogeneity of tasks breed competence. Furthermore,
each key functional area in manufacturing must have the same objective, derived from corporate
strategy. Such congruence of tasks can produce a manufacturing system that does limited things
very well, thus creating a formidable competitive weapon.

Competency for a task is developed by four characteristics:

 Simplicity
 Repetition
 Experience
 Homogeneity
Focused manufacturing must be derived from corporate strategy. In most cases requirement for
focused manufacturing is not properly understood and there are two reasons for it:

1. Product proliferation
2. Plant utilization

Product proliferation occurs when organizations market many variations of the same products.
This can be done through different colour combinations, product sizes and different product uses,
rapid increase in numbers caused by foreign and local competition and technological innovation.
This means shorter product life cycle, new products manufacture, shorter runs, lower unit
volumes and more customized products are becoming increasingly common.

In plant utilization, when there is a spare capacity due to fall off in demand in a particular
product, another product is introduced to fill the gap and strive to achieve plant utilization bench
mark levels.

(PWP) Plant –Within – a- Plant Configuration

This concept has many benefits to organizations that manufacture varieties of product categories.
It provides separate plants, within which manufacturing is focused to the needs of different parts
of its total business. In PWP, existing plant is divided both organizationally and physically. This
means it divides tasks to more manageable levels, range is narrowed and focus is increased.

Tradeoff associated with PWP is an apparent loss of economies of organization size.

A single facility is rarely proficient in more than a few Key Manufacturing Tasks. A factory that
is ill- designed and attempts to do too much Or the factory can be optimized for the wrong task.
In both these cases, it will be very unhealthy situation for stake holders. Plant – within – Plant
(PWP) is the solution for these issues. Here the plant layout has regions that become essentially
stand-alone factories. Each has (at least substantially) its own area and infrastructure such as
maintenance, purchasing and engineering.

The fig. below illustrates an example. Two major product lines had conflicting demands from
customers and conflicting demands on factory infrastructure. In addition, one of the product lines
had highly dissimilar processes. Subsequently the factory was split into three focused factories as
shown: