EVALUATION OF MANUFACTURING STRATEGY

&
ROLE OF IT

1.0 Manufacturing strategy

The concept of manufacturing strategy is pioneered by Skinner. From Harvard Business
Review article in 1969 "Manufacturing- Missing Link in Corporate Strategy". Skinner suggested
a top-down approach to manufacturing. Manufacturing objectives should be derived from
business objectives, and then manufacturing policies developed to address these objectives.
In the past few decades countries like Japan, Germany and Italy deployed manufacturing
strategy in efficient manner to gain competitive advantage. Manufacturing objectives cover such
things as cost, quality, delivery and flexibility and usually there are trade-offs between them.
Trade-off decisions are also required in a number of key areas in order to support the
manufacturing objectives. Skinner identified five decision areas:
1) Plant and equipment
2) Production planning and control
3) Labor and staffing
4) Product design / engineering
5) Organization and management.

A manufacturing strategy is defined by a pattern of decisions, both structural and

infrastructural, which determine the capability of a manufacturing system and specify how it will
operate to meet a set of manufacturing objectives which are consistent with overall business
objectives. [7]

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Evaluation of manufacturing strategy &role of IT
Need for Evaluation of manufacturing strategy
Continues evaluation as performance measurement is of great need. As manufacturing is
complex system and it needs more time to change. The strategy must be evaluated to see the
penetration of strategically changes all parameter for making corrective actions. The
performance evolution is not similar with other depart of business. The need of Performance
evaluation tools for manufacturing strategy are
• To access the current position of a strategy in manufacturing system.
• Other strategy evaluation methods consider on ROI, Accountability or Assets. But basic
difference lies where other department believes inventory as assets but maneuvering
treats it as liability.
• Other strategically evaluation reports are for the present like quarterly report, Attendance
report and appraisal report. But manufacturing is complex system. As it is complex the
strategies decided today are implemented in next two months. But the result like product
operating performance, on field failures is available after long time.
• Prove the benefits of long term advantages as manufacturing is pressurized on short term
goals.

Measurable parameters of manufacturing strategies

Successful implementation of any manufacturing strategy can be studied based on
relevant production parameters. Objectives of manufacturing strategies will impact on
production parameters. These parameters necessarily need not have to be only from the
production department. Few production parameters are shown in table 1.
Manufacturing parameters Unit of Areas
measurement
Labor efficiency % HR & Sales
Resource utilization % Manufacturing
Numbers of operators Numbers HR
Through put rate min Manufacturing
Internal distance travelled miters Manufacturing
Raw material inventory Days Manufacturing

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Evaluation of manufacturing strategy &role of IT
 Work in progress inventory Days Manufacturing
Finished goods inventory Days Manufacturing
Floor to floor time/Dore to door time % Manufacturing
On time delivery % Marketing &
sales
Product cost % Accounting
Scrap % Marketing &
sales
Inspection time Hours/product Quality
Rework & rejections Hours Quality

Table 1 Measurable production parameters

1.4 Evaluation tools

1.4.1 Empirical research methods

This method evolves extensive research on Empirical observation or data are collected in
order to evaluate a particular strategic decision. Model works in 3 major steps
• Research Questions: It includes quotations for the parameters which have to be measured.
• Theoretical Models: To get empirically tested all question must transformed to a
theoretical model. Consisting of variables. The model will generated by analysis. This
model acts tool for both data collection and analysis.
• Hypotheses: Hypothesis will define relationship between the selected variables.

1.4.2 Thin slicing

When a person is more experienced in particular filed, he does not need any tool for
measurement. This methodology can be used as tool for measuring implementation of strategy.
Author of Blink Mr.Glad well defines thin slicing as “our ability to gauge what is really
important from a very narrow period of experience. In other words, spontaneous decisions are
often as good as—or even better than—carefully planned and considered ones”

Gladwell says: "when making a decision of minor importance, I have always found it
advantageous to consider all the pros and cons. In vital matters, however, such as the choice of a
mate or a profession, the decision should come from the unconscious, from somewhere within

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Evaluation of manufacturing strategy &role of IT
ourselves. In the important decision of personal life, we should be governed, I think, by the deep
inner needs of our nature".

1.4.3 Activity based costing

Activity-Based Costing (ABC) is a costing model that identifies activities in an organization and
assigns the cost of each activity resource to all products and services according to the actual
consumption by each: it assigns more indirect costs (overhead) into direct costs. [2]

In this way an organization can establish the true cost of its individual products and services for
the purposes of identifying and eliminating those which are unprofitable and lowering the prices
of those which are overpriced.[2]

In a business organization, the ABC methodology assigns an organization's resource costs

through activities to the products and services provided to its customers. It is generally used as a
tool for understanding product and customer cost and profitability. As such, ABC has
predominantly been used to support strategic decisions such as pricing, outsourcing and
identification and measurement of process improvement initiatives. [2]

1.4.5 Balance score card

The Balanced Scorecard (BSC) is a performance management tool which began as a concept for
measuring whether the smaller-scale operational activities of a company are aligned with its
larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and
developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive
view of a business, which in turn helps organizations act in their best long-term interests.
Organizations were encouraged to measure, in addition to financial outputs, those factors
which influenced the financial outputs. For example, process performance, market share /
penetration, long term learning and skills development, and so on.
The underlying rationale is that organizations cannot directly influence financial
outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the
strategic control of the firm is unwise. Organizations should instead also measure those areas

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Evaluation of manufacturing strategy &role of IT
where direct management intervention is possible. In so doing, the early versions of the Balanced
Scorecard helped organizations achieve a degree of "balance" in selection of performance
measures. In practice, early Scorecards achieved this balance by encouraging managers to select
measures from three additional categories or perspectives: "Customer," "Internal Business
Processes" and "Learning and Growth." [3]

Figure 1 Balance score cardp [1]

1.4.6 The performance pyramid

The Performance Pyramid has been developed by Dr. Douglas Brooks, Professor of
Education at Miami University and Director of Partners in Learning. The Performance Pyramid
is a web-based model for school district continuous improvement on proficiency tests and
systems implementation. The Performance Pyramid offers fourteen critical intervention areas
factored from statewide district continuous improvement intervention plans, Ohio Operating
Standards, and research-based practice.
The base areas of the Performance Pyramid are systemic interventions that support
learner performance interventions higher up in the Performance Pyramid.

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Evaluation of manufacturing strategy &role of IT
 Figure 2 Performance pyramids [4]

1.5 Role of IT in performance evaluation of manufacturing strategy

Information technology has emerged as an agent of integration and the enabler of new
competitiveness for today’s enterprise in the global marketplace. However, has the paradigm of
strategic planning changed sufficiently to support the new role of information systems and
technology. For a long time relationship between information system functions and corporate
strategy was not of much interest to Top Management of firms. Information Systems were
thought to be synonymous with corporate data processing .Which were thought to replace top
management. [5]

Time ERA CHARACTERISTICS Characteristics

period
60s Data Processing (DP) Standalone computers, remote
from users, cost reduction
function.
70s to Management Information Distributed process,
80s Systems (MIS) interconnected, regulated by
management service, supporting
the business, user driven.
80s to Strategic Information Systems Networked, integrated systems,
90s (SIS) available and supportive to
users, relate to business
strategy, enable the business
-business driven.

Figure 3 The three era model of information technology

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Evaluation of manufacturing strategy &role of IT
 A Strategic Information System (SIS) is a system to manage information and assist in
strategic decision making. A strategic information system has been defined as, "The information
system to support or changing enterprise's strategy.

A SIS is a type of Information System that is aligned with business strategy and structure.
The alignment increases the capability to respond faster to environmental changes and thus
creates a competitive advantage. An early example was the favorable position afforded American
and United Airlines by their reservation systems, Sabre and Apollo. For many years these two
systems ensured that the two carriers' flights appeared on the first screens observed by travel
agents, thus increasing their bookings relative to competitors. A major source of controversy
surrounding SIS is their sustainability. [5]

SISs are different from other comparable systems as:

• They change the way the firm competes.
• They have an external (outward looking) focus.
• They are associated with higher project risk.
• They are innovative (and not easily copied).

1.6 TPM track for performance evaluation

TPM-Trak is India's leading software/hardware machine monitoring products that help

increase production rates, increase OEE, reduce down-time losses, and reduce cost per piece and
to enhance capabilities of decision-making. Product is TS16949, ISO and QS compliant digital
cockpits and resources in their drive towards excellence. Product uses Industrial Ethernet
(rugged, industry standard) or Wireless (easy of deployment) for connectivity between your
shop-floor and PCs/servers. [6]

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Evaluation of manufacturing strategy &role of IT
 Figure 4 Communication path of TPM track

In TPM Track uses Ethernet or RS-232 (JD1A or JD1B) communication channel. A

centralized computer is used to transfer the programs to required machines. This will enable
centralized data base for storing the programs which is strategically required while achieving
flexibility9to load any part on any machine).
The centralized system receives information’s like program starts time, End time,
Program number normally saved on component number and other operational parameters like
feed over ride, spindle override. The errors on the Machines are collated at central place to
evaluate the errors if requires effort form technical support. In Figure 5 typical error generated on
Mazak machine of plant 5 is centrally displayed. This evaluation will help in taking corrective
measures all across the company and rectify from happing of it again.

Figure 5 Error display on system [6]

The data availed from the machines will be processed and system performance parameters are
calculated. The available parameters from TPM track are
• Number of machined parts

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Evaluation of manufacturing strategy &role of IT
 • MTBF (mean time between failures)
• Predictive meantime information
• Equipment utilization
• Equipment efficiency

1.7 Conclusion
Manufacturing strategies are anticipation of future behavior of complete manufacturing
system. Strategies are always decided in toper level and executed in lower levels. Manufacturing
system being complex takes more time to change. Perhaps measuring selected production
parameters will help in accessing direction and degree of deployment of strategy.
When strategies are formed they must be monitored and evaluated at regular intervals of
time. Machine tool performance evaluation is strategically needed to reduce cost/unit is of great
importance. Proper measuring will allow organization to take necessary.
Latest IT based tools with combination of electronic circuitries will directly gather data
from machines. Process the acquired and data and give required information such as OEE,
alarms, resource utilization and sometimes directly production cost per unit.

Referencing

1. www.jiscinfonet.ac.uk/ tools/scorecard, Retrieved on 16 Feb 2009

2. http://en.wikipedia.org/wiki/Balance_Score_Card, Retrieved on 26 Feb 2009

3. http://en.wikipedia.org/wiki/Balance_Score_Card, Retrieved on 23 Feb 2009

4. http://www.executive-advice.co.uk/images/performance_pyramid_edited.jpg, Retrieved on 28
Feb 2009

5. http://viu.eng.rpi.edu/publications/strpaper.pdf, Retrieved on 18 Feb 2009

6. http://www.pioneerct.com/Solutions/prodTT.htm, Retrieved on 20 Feb2009

7. www.ifm.eng.cam.ac.uk/csp/summaries/ms.html, Retrieved on 20 Feb2009

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Evaluation of manufacturing strategy &role of IT