Developing a manufacturing strategy. (Checklist 149).

This checklist has been designed to explain the basic steps in analysing existing manufacturing activities and reviewing current manufacturing strategy.

Most organisations operate with a business plan and a broad corporate strategy, but not all manufacturing companies have a manufacturing strategy, and many of those that do, fail to update it on a regular basis. Competitive advantage can be gained by having a superior mix of people, technology, focus and direction. A manufacturing strategy explores all these issues. The time scale of completing a radical manufacturing change dictates that a long-term view is essential to permit planned investment and implementation.

Management Standards

This checklist has relevance to the MSC National Occupational Standards for Management: Key Role A--Manage Activities.

Definition

A manufacturing strategy is a working document which outlines:

* the basis for competitive advantage

* the key issues which will affect the organisation

* the strategic manufacturing aims

* the broad strategic initiatives to be pursued.

The latter should cover quality, technology, skills requirements, training and make-or-buy decisions.

Action checklist

1. Appoint a project team

The planning of a strategy requires the full-time attention of a number of knowledgeable people from the management team. Team members need to have a detailed understanding of the aims of the organisation, its products and markets, and manufacturing technology. Skills in competitor analysis are also useful.

2. Gain an understanding of the existing market position

A thorough understanding of your existing products is essential to the strategy formulation process. Ask:

* by what strategy does your organisation compete? The three generic strategies are competing on cost (cost leadership), on superior features or service (differentiation), or on a subset of the market (niche market focus).

* what product families do you have? Use product life cycles as a framework for thinking about the manufacturing requirements of different products. Plotting product life cycles for existing key products and future projects can build a picture of the size and shape of the business in the future.

In addition:

* measure the performance of each product. Focus upon the contribution, market share, and market growth.

* identify the competitive edge produced by each product family. Competitive features might include quality, delivery lead time, delivery flexibility, design flexibility or price. Determine the criteria which give you the greatest competitive advantage.

3. Identify the drivers of change

Consider:

* business criteria (product performance, market demands, the evolution of manufacturing philosophies and management structures)

* technological developments

* financial pressures.

Analyse external influences on the organisation, internal resources and capabilities, and the skills and competencies of staff by undertaking a SWOT analysis.

4. Analyse your current performance

Assessing your performance against competitive edge criteria can be difficult. Some factors are not easy to measure directly, while comparative data may be hard to obtain. Use techniques such as Pareto analysis and activity sampling to facilitate data collection. Focus upon product performance features, such as quality, delivery, flexibility, material costs and capital costs. Obtain comparative data through published reports, databases, or by talking to customers and suppliers. Consider destructive analysis of a competitor's product. Participate in benchmarking studies.

5. Identify critical components

The identification of those components most critical to the long-term success of the organisation helps you to maximise the use of the limited investment capital available. Components can be placed on a continuum of high or low business content, with those at the high end being of strategic importance. Components with a high added value should be added to the list of strategic components whilst those with a low business content should be considered for buying-in.

* Identify the major part families and describe their manufacturing characteristics.

* List the key facilities needed to manufacture the strategic components.

6. Assess your manufacturing operation

This can be a complicated task, so give yourself plenty of time.

Examine current practice with regard to a range of criteria. The nine key areas most often covered include facilities, span of process (the degree of vertical integration), capacity, processes and the way they are organised, human resources, quality, control policies, suppliers and new products.

Compare the strengths and weaknesses of current practice with your established competitive edge criteria. Where are the gaps?

7. Set new targets

Without tough targets it is difficult not only to measure achievement, but to maintain the necessary top-down pressure to achieve them. Targets can be wide-ranging and cover such criteria as tooling costs, the utilisation of equipment, defective materials or inventory.

8. Develop a new manufacturing strategy

You are now ready to compile your new manufacturing strategy.

Using your knowledge of your most important product families, your competitive advantage criteria, and the existing performance gaps, identify the weaknesses of the existing policies. Discuss possible actions and strategic choices. Consider running a simulation to test these options.

9. Develop your supplier network

For those components which you have decided to buy in, you should go through the process of identifying a potential supplier network and evaluating its ability to meet the demands of in-house manufacture. Consider your relationship with each supplier.

10. Review

As with all business plans, review your manufacturing plan annually against the developing business situation and set revised targets.

Dos and don'ts for developing a manufacturing strategy

Do

* Have a thorough understanding of your existing manufacturing strategy.

* Ensure you know the strengths and weaknesses of your existing product line.

Don't

* Finish your strategy and leave it on the shelf--it should be revised to meet changing market conditions.

Related checklists

* Performing a SWOT analysis

* A programme for benchmarking

* Establishing a performance measurement system

Useful reading Global and transnational business: strategy and management, George Stonehouse Chichester: John Wiley, 2000 Next generation manufacturing: methods and techniques, James A Jordan New York: John Wiley, 2000 Competitive manufacturing, 2nd ed, Hal Mather Abington: Woodhead Publishing, 1999 Global manufacturing vanguard: new rules from the industry elite, Micheline Maynard New York: John Wiley, 1998 Creating a winning business formula, John Mills Cambridge: Works Management and Manufacturing Engineering Group, 1996 World class manufacturing the next decade, Richard J Schonberger New York: Simon and Schuster, 1996 Manufacturing strategy and performance: a study of the UK engineering industry Mike T Sweeney and Marek Szwejczewski Cranfield: Cranfield School of Management, 1995 Strategic manufacturing for competitive advantage: transforming operations from shop floor to strategy, Steve Brown Hemel Hempstead: Prentice Hall, 1996

Useful address Institute of Operations Management, University of Warwick Science Park, Sir William Lyons Road, Coventry CV4 7EZ Tel: 02476 692266

Thought starters

* Do you have a manufacturing strategy?

* Is it reviewed on a regular basis?

* What are the strengths, weaknesses, opportunities and threats to your existing product line?

Further information

Checklists are available in the following formats:

* Individual checklists.

* A complete set of 184 on CD-ROM or in hard copy.

* Checklists with permission to photocopy.

Full details of the range of checklists available can be obtained from:

Lavis Marketing, 73 Lime Walk, Headington, Oxford, OX3 7AD Tel: 0845 702 3736 (local rate call) Fax: +44 1865 750079 or from Checkpoint on the Chartered Management Institute's website at www.managers.org.uk