Business Strategy Consulting

Manufacturing Strategy – Gaining a Competitive Advantage

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In today’s increasingly complex competitive environment, consumers are demanding greater variety, shorter lead times and lower costs. Unfortunately, in many instances corporate strategy is dominated by marketing and finance with little or no input from manufacturing. This often results in manufacturing being simply expected to respond to demand changes, which has contributed to the seemingly endless complaints about the ‘unrealistic’ demands placed on production. Many production managers are faced with overriding pressures to meet day-to-day targets, including scheduling, efficiency, quality, output, inventory reduction and productivity. This, coupled with the highly quantifiable nature of production, has led to a greater focus on operational efficiency (doing things right), rather than being strategically effective (doing the right things).

The lack of understanding by many senior managers towards manufacturing often means that when difficulties do occur, the favoured course of action is to eliminate the problem by sub-contracting the manufacturing tasks either locally or offshore. This unfortunately does not address the root cause of the problem and may even lead to the inability to compete in future markets as critical manufacturing processes and infrastructure is dismantled.

As opposed to being reactive, manufacturing executives should become more proactive and companies need to develop their manufacturing strategy as an integral part of their overall corporate strategy. Manufacturing should choose its processes and design its infrastructure (controls, systems, procedures), in a way that helps products win orders in the market place. A critical element of this process is to determine the value that customers desire (Voice of the Customer), and then for the manufacturer to match the processes and infrastructure to these ‘order winning’ criteria. Finally, the processes and infrastructure should be adaptable to changing market demands.

Although R&D, finance and HR will naturally impact on manufacturing, the link between the marketing and manufacturing strategies is perhaps the most important. Developing a coherent manufacturing strategy should include the following steps that emanate from the corporate objectives:

1. Corporate Objectives

Senior management should set the long-term company objectives including growth, profit, return on investment, target markets, environmental sustainability etc. This will then lead to the formulation of the financial, HR, R&D, marketing and manufacturing strategies.
2. Marketing Strategy
Strategic marketing initiatives include product range, pricing strategy, promotion, market positioning and mix, volumes, leader vs follower strategy, etc
3. Voice of the Customer
This vital step seeks to determine the value actually desired by customers so that the company can ‘win orders’ in the marketplace. Customers value a range of factors including price, quality, brand image, service, design flexibility and customisation, product range, delivery lead time, environmental factors, lot sizes etc.
4. Manufacturing Strategy
Having completed the above 3 steps, a manufacturing strategy can now be formulated that supports the company’s products in the marketplace and assists it to win orders against the competition. This encompasses two aspects:
a. Process Choice. Manufacturing processes to support the strategic objectives can now be chosen after having evaluated available technology, finance, plant capacity, factory layout, the role of inventory, anticipated volumes, sub-contracting etc.
b. Infrastructure Design to support production, including production planning and control systems, quality management systems, support functions, organisational structure and compensation agreements.
Gaining a competitive advantage in today’s global market requires manufacturing to become actively involved in the corporate strategic debate by being able to influence decisions for the overall good of the business.