Production Planning and Control
STRATEGY and COMPETITION
Haeryip Sihombing
Universiti Teknikal Malaysia Melaka (UTeM)
BMFP 4513
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Topic Areas of PPC Course
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Aggregate Planning
Scheduling
Supply Chain
Simulation
Lean production
Management of Information System
Prerequisite topics:
• Forecasting
Functional Areas of the Firm
Marketing
Operations
(often conservative
product analysis,
imitative/innovative,
IBM & Xerox)
(product design, manufacturing,
product quality, process
efficiency, customer service,
inventory management…)
Finance
(views manufacturing
management as portfolio
management  risk reduced
by diversification, by 1969,
70% of largest firms has
no dominant business)
What is Strategy ?
Strategy is a common vision that unites
an organization, provides consistency in
decisions, and keeps the organization
moving in the right direction
Time Horizons for Strategic Decisions
• 1. Long Term Decisions ( > year)  Strategic decision
– Locating and Sizing New Facilities
– Finding New Markets for Products
– Mission Statement: meeting quality objectives
• 2. Intermediate Term Decisions (weeks or month)
– Forecasting Product Demand
– Determining Manpower Needs
– Setting Channels of Distribution
– Equipment Purchases and Maintenance
• 3. Short Term Decisions (hours or days)  Tactical decision
– Purchasing
– Shift Scheduling and Maintenance
– Inventory Control
The Elements of Strategy
Decision Horizons of Manufacturing Strategy
History of Production and OM
• Major Thrust of the Industrial Revolution 1850-1890
–Factories tended to be small. Boss had total control. Little
regard for workers safety or workers rights.
• Production Manager Position. 1890-1920.
–Frederick Taylor champions the idea of “scientific
management”.
• As complexity grows specializations take hold.
–Inventory Control Manager
–Purchasing Manager
–Scheduling Supervisor
–Quality Control Manager etc.
GLOBALIZATION COMPETITION
Global competition is heating up to an
unprecedented degree. It appears that several
factors favor the success of some industries in
some countries
For example:
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Germany: printing presses, luxury cars, chemicals
Switzerland: pharmaceuticals, chocolate
Sweden: heavy trucks, mining equipment
United States: personal computers, software, entertainment
Japan: automobiles, consumer electronics
Porter’s Thesis
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Famed management guru, Michael Porter, has developed a
theory to explain the determinants of national competitive
advantage. These include:
Factor Conditions
(Land, Labor,Capital, etc.)
Demand Conditions
(local marketplace may be more sophisticated/demanding than world
marketplace)
Related and Supporting Industries
Firm Strategy, structure, rivalry
(e.g.: Germans are strong technically, Italian family structure,
Japanese management methods)
Time-Based Competition
“Time-based competitors focus on the bigger picture, on the entire
value-delivery system. They attempt to transform an entire organization
into one focused on the total time required to deliver a product or
service. Their goal is not to devise the best way to perform a task, but
to either eliminate the task altogether or perform it in parallel with other
talks so that over-all system response time is reduced. Becoming a
time-based competitor requires making revolutionary changes in the
ways that processes are organized” (Blackburn(1991).
Being not only the first to market but the first to volume production
as well gives a firm a decided advantage.
How Do Firms Differentiate Themselves from
Competitors?
• Low Cost Leaders: Some examples include
–WalMart and Costco in Retailing
–Korean automakers (Hyundai, Kia, etc.)
–e machines personal computers
• High Quality (and price) Leaders. Ex:
–Mercedes Benz automobiles
–Rolex Watches
–(some firms do both: Chevrolet and Cadillac)
Understand Tradeoffs
Example: Made-to-Order Pizza
Expensive
Ingredients
Slow to Cook
TIME
Toppings &
Crust Choice
Fresh, Natural
Ingredients
COST
Low Volume
Ovens
QUALITY & DESIGN
FLEXIBILITY
QUALITY
VOLUME FLEXIBILITY
Some Dimensions of Competition
• Re-engineering of the Business Process
–Streamlining process
• JIT Deliveries
–Cutting waste
• Time-based competition
–Shortening time to delivery
• Competing on Quality
Business Process Re-engineering
• The process of taking a cold hard look at the way that things
are done. Term coined by Hammer and Champy in their 1993
book.
• Classic Example: IBM Credit Corporation. The process had
been broken down to a series of multiple steps, each having
substantial delays. Approval required from 6 days to 2 weeks.
The process was re-engineered so that a single specialist
would handle a request from beginning to end. The result was
that turnaround time was slashed to an average of 4 hours!
Just-In-Time
JIT is a production control system that grew out of
Toyota’s kanban system. It is a philosophy of
production control (also know as lean production) that
attempts to reduce inventories to an absolute
minimum. It has become pretty much a standard way
of thinking in many industries (especially the
automobile.)
We will discuss JIT and its relationship to MRP in next session course.
The Product Life-Cycle Curve
The Product/Process Matrix
So you have an idea what others do … and
you have a business idea…
OPERATION AS A SYSTEM
DECISION MAKING
A Framework for Manufacturing Strategy
Customer Needs
Strategic Vision
New and Current
Products
Performance Priorities
and Requirements
Quality, Dependability,
Speed, Flexibility, and Price
Enterprise Capabilities
Operations & Supplier Capabilities
Technology
Systems
People
R&D
CIM
JIT
TQM
Distribution
Support Platforms
Financial Management
Human Resource Management
Information Management
PRODUCTION SYSTEM
CAPACITY
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Level of capacity
Size of capacity changes
Handling excess demand
Hiring/firing workers
Need for new facilities
FACILITIES
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Best size for facility
Large or small facilities
Facility focus
Facility location
HUMAN RESOURCES
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Skill levels required
Degree of autonomy
Policies
Profit sharing
Individual or team work
Type of supervision
Levels of management
Training
QUALITY
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Target level
Measurement
Employee involvement
Training
Systems needed to ensure quality
Maintaining quality awareness
Evaluating quality efforts
Determining customer perceptions
SOURCING
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Degree of vertical integration
Supplier selection
Supplier relationship
Supplier quality
Supplier cooperation
OPERATIONS PRIORITIES
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Cost
Quality
Delivery Flexibility
Delivery Speed
Delivery Reliability
Coping with Changes in Demand
Flexibility and New Product
Introduction Speed
The TRANSFORMATION PROCESS
External Environment
Customer or client
participation
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Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Operations and
transformations
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Information on
performance
Outputs
 Goods
 Services
MANAGEMENT IN e-BUSINESS
TYPES OF B2B TRANSACTIONS
GLOBALIZED THE BUSINESS
COMPETITION
STRATEGIC DECISIONS IN OPERATIONS
Example : WAL-MART
Product Vs. Process Vs. Technology
Matrix
ISSUES and TRENDS
The END