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Chapter 3
Process technology
TPK4180 Manufacturing Strategy
Erlend Alfnes, NTNU, 7.2.2013
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Decisions areas:
Vertical integration Process technology Capacity and Facilities Sourcing
Business processes Supply chain coordination Information technology Capabilities development
Resources and activities
Performance objectives:
Cost Quality Availability Featues/Innov.
Environment
Competitive
priorities Corporate strategy
Business strategy
Operational experience
Operations strategy
Strategic Theory
Manufacturing strategy framework
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Agenda
1. Tools for overall strategy development
2. Tools for analysing process technology
3. Process technology strategy decisions
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Manufacturing strategy development
1 What businesses are we in?
(Five forces, opportunities and threats, order winners and qualifiers)
2 Competitive strategy:
(Performance objectives, gap analysis, strengths and weaknesses)
3 Existing manufacturing strategy:
(Decisions areas, four stage model, product process matrix, product profiling)
4 Revised manufacturing strategy: How will the decisions
we make about manufacturing fit with performance objectives
and with decisions made in other functional areas?
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Strategy gap?
Competency gap?
Resource & process gap?
Performance Objectives
Resources
&
Processes Capabilities
Deliverable Performance
Needed Capabilities
Needed Resources &
Processes
Market view Resource view
Tools: The Strategic Operational Audit
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Tools: Gap analysis on Performance (1)
Delivery time
Delivery precision Quality conformance Customisation
Price
Critical success factors
1 2 3 4 5 6 7 8 9 10 Actual performance versus market requirements
M
M
M
M M
A A
A
A A
M Market A Actual
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Tools: Gap analysis on performance (2)
X
X
X Quality
(specification)
Quality (conformance)
Speed
Dependability Volume
flexibility Delivery
flexibility
Customization Cost
Current products New products
X X
X X
X
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Agenda
1. Tools for overall strategy development
2. Tools for analysing process technology
3. Process technology strategy decisions
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Process types
Job Shop Batch
Continous flow
Project Repetitive
flow
Connected line flow
Continuous, automated, rigid line flow
Process segments tightly linked
Disconnected line flow Jumbled flow but a dominant flow exists
Jumbled flow Process segments loosely
linked
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Layout types
• Fixed position or location layout
• Process or functional layout
• Cellular or combined layout
• Product layout
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Teknologi og samfunn 14
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
(Hayes and Wheelwright 1979)
Teknologi og samfunn 15
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
Teknologi og samfunn
Raw materials
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Engineer T o Order Make T o Order
Assemble T o Order Make T o Stock
Compo nents
Semi finished products
Finished products
Supplier s Cus tom ers
Forecasts and assumptions
Decoupling point
Customer orders
Interaction
Strategies:
Teknologi og samfunn 17
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
ETO
MTO
ATO
MTS
Teknologi og samfunn 18
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
ATO
MTS
Teknologi og samfunn 19
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
(Hayes and Wheelwright 1979)
Task: ACC and DJC
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Sales volume
Customers Competitors
Dominant operations performance objectives
Introduction into market
Growth in market
acceptance Maturity of market, sales
level off Decline as market become
saturated Innovators Early adopters Bulk of market Laggard
Likely order winners
Few /none Increasing numbers Stable numbers Declining numbers Product/service
specification
Availability Low price
Dependable supply
Low price
Likely order qualifiers
Quality Range
Price Range
Range Quality
Dependable supply
Flexibility Quality
Speed
Dependability Quality
Cost
Dependability
Cost
The effects of the product/service life cycle on
operations performance objectives
Teknologi og samfunn 24
Job shop Batch Repetitive
flow Continuous
flow Project
Proce sses
Products
Volume
Low High
Variety
High Low
(Hayes and Wheelwright 1979)
1
2
3
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Product profiling
Products and markets
Operations
Investments
Aspects
Product type Product range Customer order size Level of product change required Rate of new product introductions Order w inner Process nature Process flexibility Operations volumes Operations key strategic task Level of investement
Typical characteristics of process choice jobshop batch line
Special Wide Small High High
Delivery speed/
unique capability General purpose High
Low
Meet specification/
delivery speed Low
Standard Narrow Large Low Low Price Dedicated Low High Low cost operations High Position of enterprise X
Position of product group Y
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Agenda
1. Tools for overall strategy development
2. Tools for analysing process technology
3. Process technology strategy decisions
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• Labor intensive versus automated processes
• Flexible versus rigid processes
• Scalability
• Economic evaluation
Process Technology Choices:
Choosing an Appropriate Technology
Where C
0= initial cost
FV
k= benefits – costs in period k
FV
n= salvage value in year n
i = interest rate
Teknologi og samfunn 31
Job shop Batch Repetitive
flow Continuous
flow Project
Products
Volume
Low High
Variety
High Low
(Hayes and Wheelwright 1979)
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$
Minimum Efficient
Q
Scale
Scale curves
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$
Q
AC1 AC2
Process technologies and
scale curves
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$
Cumulative Production AC2 AC
2Q1 AC1
Q1
Learning curves
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$
Q
AC1(Q1) AC2(2Q1)
The effect of learning
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Flexible versus dedicated/rigid
• “Flexibility with automation can be very expensive (and take a long time to build/validate)”
Capital Investment
(CapEx $)
Agility flexibility
or product changeover timeDedicated Flexible
with Automation
Adaptable
Days Months Quarters
0 0
Scope flexibility
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Product mix and trade-off:
Wilbur Chocolate
The choice of process technology shapes the trade-off curve
1 20 40 60 80 100
$1.00
$1.02
$1.04
$1.06
$1.08
$1.10
$1.12
Unit Cost c
Product Selection N
Batch process Job shop
Flow shop
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What INVESTMENT both managerial and financial
will be needed?
What RETURN in terms of benefits to the operation
will it give?
What RISKS do we run if things go wrong?
Feasibility – how difficult is it?
The criteria for screening
concepts
Overall evaluation of
the concept Acceptability – how
worthwhile is it?
Vulnerability – what could go wrong?
Evaluation criteria for assessing concepts
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Operations resource capabilities Is the process technology:
Market requirements How does the process technology affect:
Proposed process technology
Financial evaluation Does the process technology give an
acceptable return on the investment necessary for its adoption?
Scarce?
Difficult to move?
Difficult to copy?
Difficult to substitute for?
Quality?
Speed?
Dependability?
Flexibility?
Cost?
Assessing the 'acceptability of a process
technology
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End of presentation
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Process Technology Choices: Managing Technology in Multi-site Networks
1. Product and service standardisation 2. Stability of technology
3. Basis for learning and improvement
4. Different levels of volume and scale
5. Labour force impacts
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Managing Technology in Multi-site Networks:
Centralization and Standardization
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Process Technology Choices:
Stability of technology
• Intel are able to use the same equipement for several
product generations
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Different models of learning
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Managing Technology in Multi-site
Networks: Learning Approaches
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Possible options to pursue
Semi-Automated Fully Automated Autonomous
Standardized
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Process Technology Strategy Development Approach
1. Understand the business strategy and competitive environment
2. Understand the technology trends in the industry 3. Understand the internal capabilities of the
organization
4. Identify and assess process technology investment alternatives
5. Develop an implementation plan
6. Implement, assess and measure benefits
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