2/11/2024

MMS 7204 Manufacturing Strategy

LECTURE FIVE
Focused Manufacturing

Course Lecturer
Dr Catherine Wandera

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Outline of Lecture Five

6. Focused Manufacturing

6.1 Principles and Concepts of Focused Manufacturing

6.2 Trade-Offs in Focused Manufacturing

6.3 Alternative Approaches to Focused Manufacturing

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6.0 Focused Manufacturing

Focused ✓ In managing manufacturing, responding to the different market
manufacturing is demands made on the manufacturing facilities is difficult because of
about linking an the wide and diverse nature of market demands which often generate
organization's a high level of complexity in the corresponding parts of the
manufacturing manufacturing function, including suppliers.
facilities to the
▪ Focusing the market demands to which individual facilities must
appropriate
respond reduces the level of complexity in managing manufacturing
competitive factors
operations resulting in improved overall performance.
of its business(es),
with the aim of ▪ Focused market demands means having a limited and consistent set
enabling the of tasks which involves focusing each plant on a limited, concise,
company to gain manageable set of product, technologies, volumes, and markets;
greater control of and structuring basic manufacturing policies and supporting
its competitive services so that they focus on one explicit manufacturing task,
position. instead of on many inconsistent, conflicting, implicit tasks.

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Focused Manufacturing: Minimizing Waste

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6.1 Principles and Concepts of Focused Manufacturing

1. Principle of Economies of Scale in Markets Characterized by

Difference

2. Marketing

3. Increase in Plant Size

4. Manufacturing

5. Plant Utilization

6. Management Use of Specialists as a Basis for Controlling Business

7. Looking for a Panacea (i.e. Universal Remedy)

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1. Principle of Economies of Scale in Markets Characterized by

Difference
❑ The principle of economies of scale is a sound and appropriate way of
organizing and managing businesses.

✓ Economics of scale are most appropriate for, and best applied to, high-
volume, steady-state markets (that is where similarity is the hallmark).

✓ However, the advantages that can accrue from applying economies of

scale are no longer being realized because the markets and the
necessary corporate response to and support for them have changed.

✓ While markets in the past were characterized by similarity, today's

markets are characterized by difference defined by low-volume and
dynamic in nature (that is where difference is the hallmark).

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2. Marketing
❑ Marketing-led strategies are based on principles of growth through
extending the current product range.

▪ Based on the principle of the economies from using existing plant

capacity where possible and being supported by the existing overhead
structure, new products (even those requiring new technologies) are
manufactured, partly at least, on existing processes, and almost always
within the same infrastructure.

▪ Over time, the incremental nature of the marketing changes

considerably alters the manufacturing task resulting is complexity,
confusion, and lacks of focus. Therefore, asked to provide the different
order-winning criteria for a range of products, a factory must make a
series of compromises.

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3. Increase in Plant size

❑ Manufacturing companies that are faced with a shortage of capacity
are attracted to incremental onsite expansion to leverage on the
advantages of cost and overhead and provision of a better hedge
against future uncertainty.

▪ However, they rarely take into account the costs of the

associated uplift in terms of complexity and the bureaucratic
structures in big plants where the worker is separated from
the top executives by many layers of management.

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4. Manufacturing

❑ To aggravate the situation of compromise, manufacturing in these

circumstances will rarely have a definition of its task.

✓ Manufacturing will be required to perform on every yardstick,

with these often changing from one day to the next, depending
on the pressures from within and outside the business.

▪ The result is that manufacturing, without an agreed

strategy, will respond as best it can, independently
deciding on the best corporate compromises or trade-offs
involved and the result is reduced plant performance.

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5. Plant Utilization
❑ High utilization of the plant is the focus of the principle of economies of scale.
✓ As production capacity is released due to a fall-off in demand for a product(s),
companies typically re-utilize the spare capacity by introducing new products.
✓ Most times the justification for companies to purchase new processes or equipment for
new products is based on total volumes but planning to use existing process capacity
for some or all of the operations for new products clears the investment hurdle.
▪ However, when evaluating the suitability of existing processes for a new product,
companies often only check that technical specifications are met but rarely check
the consistency of the business requirement (manufacturing task) for each of the
new products.
▪ Furthermore, the evaluation of existing processes is not just for current
requirements but must be made over time as products go through their life
cycles and relevant order-winners change correspondingly.
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6. Management Use of Specialists as a Basis for Controlling Business

❑ Specialists (professionals) in a company often have conventional views of

success in each of their particular fields. Moreover, the essential link between
the activities of specialists and the major functions of a business requires close
cooperation and understanding.

✓ However, a shared understanding of what is required is often insufficiently

achieved in a company that lacks a clear focus of the business.

▪ Consequently, the support systems, controls, information provision

and infrastructure are not developed in line with the agreed and
appropriate corporate needs.

▪ Trade-offs are assessed on fragmented and uncoordinated advice of

specialists based on what seems best at the time, rather than on an
agreed strategic appreciation of competitive performance.

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7. Looking for a Panacea (i.e. a Universal Remedy)

❑ Manufacturing businesses can seek resolutions to problems
through a panacea (i.e. a universal remedy).
✓ Firstly, developments in manufacturing, and other
functions to fit the market needs of a business.
▪ Japanese companies undertook developments in
response to requirements placed on their
manufacturing functions to improve activities
recognized as critical to the overall success of the
business resulting in concepts and approaches like JIT,
total quality management, etc.
✓ Secondly, adequate time is required to develop and
fit major initiatives into existing structures.
▪ Japanese companies took some 30 years to perfect their
ideas and to adapt these approaches carefully to the
needs of their business.

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6.2 Trade-Offs in Focused Manufacturing (1)

❑ The choice of focused manufacturing implies trade-offs.

✓ Arriving at the decision of focused manufacturing requires

manufacturing companies to distinguish between the gains
associated with size reduction and manageable units and the
gains that accrue from the approach of focused manufacturing.

▪ Although a reduction in size may go hand in hand with the

decision to focus, companies must differentiate the
advantages resulting from any decision to reduce size and
the advantages unique to each product choice (orientation)
in focused manufacturing.

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Competitive Advantage in Focused Manufacturing (1)

❑ A manufacturing business strategy needs to identify

Nature of the Competitive Advantage
how products of the manufacturing firm will achieve
a sustainable competitive advantage in the market Cost Differentiation
over other competing products.
Market where Business Competes

Broad Scope

❑ A competitive advantage is the greater value a Cost

Differentiation
manufacturing firm offers its customers (e.g. lower Leadership
Leadership
prices, or greater benefits/service that justifies a (Low Cost)
higher price) over the offerings of its competitors.
Narrow Scope

❑ The four "generic" business strategies for gaining

Cost Focus Differentiation
competitive advantage as suggested by Porter relate (Focused Low Focus
to the scope of the business' activities (narrow vs Cost)
broad) and the extent to which the manufacturing
firm seeks to differentiate its products.

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Competitive Advantage in Focused Manufacturing (2)
1. Low Cost Manufacturing/ Cost Leadership
✓ Low cost is a broad-based market strategy
employed by manufacturing firms that are
efficient in engineering tasks, production
operations, and physical distribution so
that they focus on a large market and are
able to minimize costs in marketing and
Research and Development (R&D).
✓ This low cost strategy is effective for
industries where there is limited
possibility of product differentiation and
buyers are price sensitive.
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Competitive Advantage in Focused Manufacturing (3)
3. Differentiation
✓ A differentiation strategy is employed by a
manufacturer that produces and markets a
unique product to a broad-based market.
✓ Price is not the significant aspect of in this
strategy as consumers are willing to pay a
high price for a product that they perceive to
be different from the competitors products.
✓ The differentiation may be terms of product
design, method of distribution, or any other
product aspect that is significant to a broad
group of consumers.
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2. Focused Low Cost Manufacturing
✓ A cost-focus strategy is a low-cost,
narrowly focused market strategy
employed by manufacturing firms that
focus on a particular niche market that
needs an efficient product and is
willing to forgo extras in favor of a
lower product price.
✓ With this strategy, a company’s costs
can be reduced by eliminating service
and providing a low-cost method of
distribution.
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4. Focused Differentiation
✓ A focused differentiation
strategy involves
production and marketing
of a unique product to a
narrow and unique market.
✓ The focused differentiation
strategy is employed by a
manufacturer that provides
better goods and services
than its competitors.
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Gains of Plant Size Reduction vs Gains of Focusing Orientation

❑ Focusing manufacturing businesses leads to reduction in plant sizes but

it is important to separate the concept of downsizing (i.e. reducing plant
size reduction) and the concept of focusing the manufacturing to
appropriate competitive factors.

✓ Increasing the plant size to gain from the economies of scale is

based on reducing overall costs while focusing the orientation of
manufacturing is concerned with orientating parts of a
manufacturing business to meet distinctive market needs.

▪ Thus focusing orientation of manufacturing facilitates a

company’s response to its markets which gives the manufacturing
company a competitive advantage in the market.

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Advantages and Disadvantages of Downsizing (Smaller Plants)

❑ Advantages of smaller manufacturing plants: ❑ Disadvantage of

1) The potential for improved communication, smaller manufacturing
plants:
2) Greater orientation towards a well-understood and
agreed set of business objectives, ✓ Smaller plants may
3) Simpler and more appropriate forms of control and lead to increase or
managerial style, duplication of certain
processes or parts of
4) Higher levels of employee participation and the infrastructure, such
motivation, as procedures and
5) Shorter process lead times, specialist capabilities.
6) Lower work-in-progress inventory,
7) Reduced complexity of the production-control task,
8) More accurate assessment of financial performance.

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6.3 Alternative Approaches to Focused Manufacturing

❑ The three approaches to focusing facilities include:.

1) Based on Products and Markets

2) Based on Processes

3) Based on Order-Winners/ Manufacturing Task

❑ In reality, many manufacturing businesses are best served by

adopting a combination of approaches when focusing plants and
the primary concern of a company is how to achieve the focus
approach combination.

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(1) Focused Manufacturing Based on Products and Markets

❑ The approach of focusing manufacturing based on Products/

Markets orients relevant parts of the manufacturing
facilities towards a particular customer, generic group of
products or industrial sector.

✓ This is a basis for focus that reflects the breakdown of

actual or forecast sales typically used by companies.

✓ Typifying a marketing perspective, such a focus often

mirrors this function's view of the business.

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(2) Focusing Manufacturing Based on Processes

❑ This focusing approach groups together ✓ Products needing the same process go into
products that are made with similar the same manufacturing unit, thereby
processes in order benefit from concentrated avoiding the potential duplication of
expertise and improved utilization of investment.
manufacturing processes. Focusing based on
▪ However, breaking plants into two or
processes is accomplished by identifying more focused units results in
products on the basis of their process underutilization of the process capacities
requirements. compared to when using a batch process
✓ Companies that make repeat or standard which arranges processes on a
products but with insufficient volume to functional basis which facilitates
utilization and re-utilization of process
go to a flow line will choose batch as the
capability. This is because a batch
appropriate process. This enables spare
process has all equipment providing
capacity to be utilized and reutilized by similar technical capabilities in the
any product requiring an operation(s) to same geographical area and managed as
be completed by the process in question. a whole unit.

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(3) Focusing Manufacturing Based on Order-Winners/

Manufacturing Task
❑ This approach allocates products to a particular unit on the basis of the
different order-winners and qualifiers that manufacturing needs to
provide.

✓ By focusing parts of a manufacturing unit, this approach creates

conditions where the task (that is, what manufacturing has to do
well to support the particular order-winners and qualifiers) is
consistent.

✓ Often the orientation of manufacturing based on order-winners/

manufacturing task is paralleled by differences in volume levels.

✓ Breaking down plants into two or more units provides the best
conditions for creating a consistent and coherent set of
manufacturing requirements, tasks and priorities.
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References
1. Hill, T. (2000). Manufacturing Strategy, Palgrave, London.
https://doi.org/10.1007/978-1-349-14018-3_5

2. Anon. https://open.lib.umn.edu/principlesmanagement/chapter/5-5-strategy-
as-trade-offs-discipline-and-focus/, Accessed 8th May 2023

3. Terry J. Hill, Rafael Menda and David M. Dilts (1998). Using Product
Profiling to Illustrate Manufacturing-Marketing Misalignment, Interfaces,
Vol. 28, No. 4 (Jul.-Aug.,1998), pp. 47-63 (17 pages), Informs,
https://www.jstor.org/stable/25062398

4. Terry J. Hill, Rafael Menda, David M. Dilts, 1998. Using Product Profiling
to Illustrate Manufacturing-Marketing Misalignment, Informs Journal on
Applied Analytics, https://doi.org/10.1287/inte.28.4.47

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