Customizing manufacturing strategy

Peter J. Sackett The CIM Institute, Craneld University, Craneld, UK Douglas J. Maxwell The CIM Institute, Craneld University, Craneld, UK Paul A. Lowenthal The CIM Institute, Craneld University, Craneld, UK
Draws on the convergence in enterprise and manufacturing strategies apparent in the established theories and models. Develops this form through enterprise-wide competitive dimensions into a customizable business environment and manufacturing technology/programmespecic support framework. This generic framework links the competitive dimensions, the manufacturing-enterprise, business-process chains and the manufacturing typology; each is selectable and customizable for a specic manufacturing business operation. Describes the result which is a method of decomposing business goals into aggregate business-specic, manufacturing-performance indicators. These can be linked to measures of manufacturing performance and directly related to a manufacturing technology or a manufacturing programme.

Introduction
Manufacturing business is becoming more volatile. The need for logical and structured links between business strategy and manufacturing strategy is well established but rarely formally achieved. The operation specic architecture adopted in existing tools limits their ongoing value as part of the senior managers tool-kit and undermines the notion of a generic approach. A decade ago Puttick (1986) reported that a common question posed by chief executives is what technology or technologies should I buy to achieve my business objectives? In 1996 executives might also ask how can I use organizational learning?, and what parts of my business should I re-engineer rst? These questions are being posed in the context of achieving increasingly demanding business objectives. The new business philosophies and the new manufacturing philosophies of the late 1990s are increasing both the importance and the dynamic nature of the interface between high level business strategy and operations manufacturing strategy . Developments, particularly the rate-ofchange in the competitive environment, are generating new requirements for manufacturing decision support tools (Sackett et al., 1994). The extended enterprise is being adopted as a means of achieving resilient business operation (ONeill and Sackett, 1996). In these circumstances doing the right thing is perhaps even more important than doing things right which has been the focus of the 1990s style business process re-engineering (Trisoglio, 1995). These changes create the requirements for a coherent, upgradable and locally customizable framework to provide a creative support system at the business strategy/manufacturing strategy interface. At the user level, existing decision support tools, while based in sound manufacturing business theory, typically serve a corporate management objective of prediction, optimization and control. Usually they have been developed for highly specic market/technology/time point application; often they are appropriate to large organizations and staff-intensive support mechanisms. They have been associated with top-

down nancial accounting and control systems, even with mainframe computing. The application domain for an appropriate framework is not restricted to large organizations. The European manufacturing base, including small- and medium-sized companies, is being encouraged by member state governments to adopt both advanced manufacturing technologies and programmes. The extended enterprise operational form is becoming a means of survival for many enterprises. Manufacturing technologies do not give a manufacturing advantage; they provide a market-based means of survival through product excellence and operations resilience. A range of manufacturing decision support tools for use by managers on their own personal computers, applicable across industry sectors and customizable to local and individual need are required. Good decision support tools will augment creativity and innovation inherent in the manufacturing managers environment. This paper describes the basis for a personal decision support system addressing the selection and application of alternative manufacturing philosophies.

Manufacturing context
Senior managers face a plethora of new advanced manufacturing technologies alongside a growing number of advanced manufacturing programmes, for example: concurrent engineering; agile manufacturing. These technologies and programmes have far reaching consequences that are not easily evaluated in their contribution to enterprise strategy . The stimulus for the development of the decision support tool framework described here is the authors belief that the use of appropriate advanced manufacturing technologies and advanced manufacturing programmes is directly related to the ability of the company to quantify the likely impact of the technology/programme on the business. Generic decision support tools to facilitate this quantication of impact are not readily available. The functionality and the architecture of such a tool have not been well dened. The decision support tool needs to be relevant to present and future market conditions.

This work has been partly funded under the European Commission, BRITE EURAM, Fundamental Research Programme, Project No. 7094. The Programme participants are: Ford Automotive Operations, British Steel, Daimler Benz, Kewill, Digital Equipment, University of Karlsruhe, University College Galway, Craneld University.

Integrated Manufacturing Systems 8/6 [1997] 359364 MCB University Press [ISSN 0957-6061]

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Figure 1 Positioning the decision support system Business strategy Decision support system Manufacturing strategy

Manufacturing business M process chains an

Framework
The European Commission BRITE EURAM Fundamental Research Project, Number 7094, (Jackson and Sackett, 1995) has demonstrated that to formalize and apply the link between business strategy and manufacturing strategy requires the measurement of three macro factors. These factors are: the product and market drivers, the specic manufacturing business processes, and the choice of manufacturing philosophy . The decision tool framework is expanded to reect this and in application constitutes a three-dimensional decision space. The axes of the decision space are: the determinate competitive dimensions of the business, the manufacturing-enterprise, business-process chains, and the manufacturing typology adopted. The generic framework is a hexahedral (a six-sided-threedimensional object, see Figure 2). This format provides a robust and customizable method of decomposing business goals and relating them directly to manufacturing issues. The corporate vision can be mapped by visible and meaningful business metrics to the selection of appropriate manufacturing technologies and manufacturing programmes. The three axes of the hexahedral are now examined.

dimensions, up to ve in a manufacturing business, are at the heart of a common format, six process step, hierarchical decomposition map, Figure 3. The corporate vision can be cascaded down, and the manufacturing technologies and programmes can be cascaded up, to the competitive dimensions of the business. The top-down cascade from the corporate vision is normally extracted from the company annual report. It should comprise a succinct challenge to all employees. Chrysler recently used: Not the biggest, just the best, as its vision statement. The enterprise

Figure 3 The decomposition map Business strategy Corporate vision

uf ac

Integrated Manufacturing Systems 8/6 [1997] 359364

tu

Competitive dimensions

rin

ty

po

Competitive dimensions
Quality, flexibility, time, cost, environment

Competitive dimensions
The authors comprehensively reviewed the theories, models and frameworks used in the strategy formulation process in manufacturing enterprise management. This conrmed the convergence in enterprise and manufacturing strategies encapsulated in the notion of common competitive dimensions. These have been validated by industrial application (Sackett et al., 1996). The competitive

Critical manufacturing capability metrics Manufacturing technologies and programmes Manufacturing strategy

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lo

Peter J. Sackett, Douglas J. Maxwell and Paul A. Lowenthal Customizing manufacturing strategy

It needs to encompass the manufacturing challenges of at least the near future. The tool must accommodate the extended enterprise; this operational mode stresses exibility, complex product capability, and a greater requirement for co-operation across, as well as within, the total business value chain. The operating position of the framework tool is expressed in single dimension format (Figure 1).

Figure 2 The hexahedral

gy

Enterprise mission Critical enterprise success factors

Peter J. Sackett, Douglas J. Maxwell and Paul A. Lowenthal Customizing manufacturing strategy Integrated Manufacturing Systems 8/6 [1997] 359364

mission denes the way in which the business operates and usually includes a sense of direction for the future. For example: Ford Motor Company is a world-wide leader in automotive products and services to continually improve our products and services to meet customer needs, allowing us to prosper as a business The enterprise mission species the basis of competition for the particular business unit under consideration; it is the reason customers buy the products/services offered by the enterprise. In smaller companies clarity here can require workshop/interview activities with the senior management to build a coherent, high-level common view. The critical enterprise success factors are what the organization has to be good at to succeed. Usually there are at least three critical enterprise success factors for an organization. Examples for a manufacturing company might include pre-eminent manufacturing, or low cost producer. This is the extent of the business strategy . The primary interface with the manufacturing strategy is the competitive dimension set. The bottom-up cascade starts with the manufacturing programmes and technologies. A technology might be automated inspection, a programme might be just-in-time. These examples target different competitive dimensions. The critical manufacturing capability metrics adopted are the key to achieving success in these or any other manufacturing investment. Metrics must be determined against appropriate criteria before implementation. These can also be used as a basis for ongoing performance assessment should the technology or programme be adopted. The manufacturing metrics arise from, and are directly associated with, each specic programme or technology: they are not determined by the critical enterprise success factors. Critical manufacturing capability metrics interface with the success factors through the ve competitive dimensions: quality, exibility, time, cost, and environment. Research has shown these to be applicable, with different individual signicance, across manufacturing sectors (Sackett et al., 1996). The competitive dimensions form the foundation axis of the decision space hexahedral.

change activity across all enterprise functions. Here we are only concerned with those processes that directly impact manufacturing (Hill, 1985). Too often the full opportunity for performance enhancement arising from technology investment has been lost because the manufacturing business process impacts are blurred. What gets measured gets done. The measured, and therefore likely to be achieved, benets have been limited to the local environment of the technology or programme. The critical enterprise success factors need to be tightly related to a manufacturing business process to achieve meaningful impact. The full range of manufacturing activity is grouped under the ve manufacturing enterprise process chains: manufacturing process chain; co-development chain; product conguration chain; customer order fullment chain; and partnership sourcing chain. The enterprise positioning of these chains is shown in Figure 4 and each is described. The manufacturing process chain embraces all the activities directly involved in the physical production of the enterprise product or delivery of the enterprise service. It may be located within a single plant or in geographically remote manufacturing sites. In the extended enterprise all the manufacturing chains are likely to interact, probably in real time decision making, with remote sites. The co-development chain contains all the activities directly involved with the internal and external supplier knowledge and capability contribution to the product design and process design activities. In the limit the codevelopment may occur wholly in the remote members of the chain. This can be a form of black box engineering. In the extended enterprise the objective is to reach levels of world-class excellence through an appropriate contribution of expertise by all the process chain members. The product conguration chain is the product and service design and delivery process specication. It is normally achieved in conjunction with a market-needs analysis and the legislative issues. The customer order fullment chain contains all the activities involved in the planning, data transmission, control, measurement and shipment of product/service to customer order requirements. The partnership sourcing chain is the activity directly involved in the co-ordination of vendor supplies to the manufacturing process. It includes planning requirements, selecting suppliers and achieving performance criteria.

Manufacturing business process chains

A consideration of even a single competitive dimension is too coarse a division for manufacturing decision making. A focus on a manufacturing business process in conjunction with a single competitive dimension allows the specic impact of a manufacturing change to be both analysed and controlled (Porter, 1985). Business process examination has become a catch-all for management of

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Peter J. Sackett, Douglas J. Maxwell and Paul A. Lowenthal Customizing manufacturing strategy Integrated Manufacturing Systems 8/6 [1997] 359364

Manufacturing typology
The customer order decoupling point forms a basis of describing manufacturing enterprise typology . It provides a sharper graduation than the classic mass or batch or continuous manufacturing process based terminology . As a part of the structured decision framework we require a business driven categorization; customer order point decoupling point provides a neat and appropriate solution. This enterprise typology denes the following four modes: 1 make-to-stock (MTS); 2 make-to-order (MTO); 3 assemble-to-order (ATO); and 4 engineer-to-order (ETO). This well established typology, (Wallace and Dougherty, 1987; Wiendahl and Scholtissek, 1994) provides an excellent means of differentiating traditional manufacturing organizations. There is a well-founded belief that competitive pressures are moving leading organization operation across this spectrum from right to left (Figure 5). At an international level we are moving from an era of mass production of stock items to mass customization of unique product; engineer-to-order is gaining in importance. Many companies are nding that the engineering effort involved in the engineer-to-order typology is overwhelming their traditional systems. This is one reason for the increase in interest in concurrent engineering and many other programmes that facilitate the effective use and reuse of scarce engineering resource. Make-to-stock is physical resource intensive, engineer-toorder is information resource intensive and this provides a basis of categorization of manufacturing business. This typology has a good theoretical basis and works well in larger companies where the scale of business and individual business units provides clear boundaries to typology operation. Practical application by the

Figure 4 Business process chains

Product design Process design Co-development chain Product configuration chain

Suppliers

Manufacturing process

Customers

Partnership sourcing chain Production planning and control

Customer order fulfilment chain

authors in the small- and medium-sized enterprise base, particularly for advanced business forms, has proved to be challenging. Here even the smaller business sub-units often display instances of, for example, maketo-stock and make-to-order typologies on the same product line/product cell. The typology may therefore be difficult to apply at the local level. An alternative classication is the use of Puttick Grids (Puttick, 1986). These can be represented as a quadrant with dimensions of product complexity and market uncertainty . Complexity is a means of measuring the number of both physical product items and product/process knowledge entities that must be managed in even the smallest manufacturing business. Complexity is greatly inuenced by the type of product being delivered. Uncertainty measures the product variety demanded by the customer and the uctuations in demand and delivery time expectation. It is a function of the unpredictable behaviour of the marketplace and the nature of the product. At one time uncertainty was considered to apply to the production environment as well as the market. Now we recognize that production environment uncertainty can be managed to a level where it does not impact on the business typology . The resulting typology provides four basic complexity/uncertainty manufacturing business types. For example a company manufacturing incandescent light bulbs for the domestic market would be classied as low complexity (product)/low uncertainty (market). In the same way that the trend in European business needs to be from make-to-stock to engineer-to-order, in the European arena successful, sustainable business needs to move towards the high complexity/high uncertainty quadrant. Companies in this quadrant might, for example, manufacture special capital equipment, high service level or individual to customer items. The EUREKA Factory for the Future study (Factory of the Future, 1995), jointly sponsored by the Ministre de lIndustrie of France, the Department of Trade and Industry in Great Britain, the Bundesministerium fr Forschung und Technologie in Germany, classied this quadrant as super value goods, see Figure 6. This EUREKA study has directly addressed the needs and characteristics of future manufacturing systems for small- and mediumsized enterprises. This four component typology is suited to categorization of smaller and advanced operation manufacturing businesses. It is simple to apply .

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Peter J. Sackett, Douglas J. Maxwell and Paul A. Lowenthal Customizing manufacturing strategy Integrated Manufacturing Systems 8/6 [1997] 359364

Architecture
The competitive dimensions, the manufacturing business process chains, and the manufacturing typologies may now be combined so that the hexahedral framework referred to earlier can be elaborated. Figure 7 represents the framework for a manufacturing environment where the order decoupling point can be clearly identied.

Figure 5 Customer order decoupling Stock point S U P P L I E R Production based on forecasts Production based on customer orders Figure 6 Product complexity market uncertainty matrix Complexity High High Super value goods Low Decoupling point C U S T O M E R Strategy Make to stock Assemble to order Make to order Engineer to order

Uncertainty

Fashion goods

Figure 7 Manufacturing environment appropriate to customer order decoupling point

Competitive dimensions

Corporate vision Enterprise mission Critical enterprise success factors

Low

Consumer durables

Commodity products

Manufacturing environments which do not demonstrate a clear order decoupling point can use a similar scheme but adopt the uncertainty/complexity grid typology, (see Figure 8). In both cases the manufacturing typology has four classes. The high level corporate vision statement is decomposed via the ve competitive dimensions, deepened by the ve manufacturing business process chains and structured through the four manufacturing typologies. The resultant hexahedral has 5 5 4 = 100 manufacturing performance indicators. These manufacturing performance indicator mini-cubes contain structured collections of measures suitable for benchmarking against industry standards. They parallel the more traditional measures available to nancial managers such as return on investment, return on capital employed and net present value. A particular business unit will be represented by a small sub-set of the 100 manufacturing performance indicators. For example, a manufacturing manager contemplating an investment in an advanced manufacturing programme may be mainly concerned with three competitive dimensions of cost, exibility and time; be operating in the make-toorder manufacturing typology; and be concerned with the product conguration chain. This situation presents just three manufacturing performance indicators from the 100 indicator envelope. These three manufacturing performance indicators represent business goals coherently translated into measures of manufacturing performance. Manufacturing performance indicators can be cascaded into a series of measures of manufacturing performance. Taking one of these manufacturing performance indicators selected by a manufacturing manager it is expressed in terms of the: competitive dimension cost; manufacturing business process chain product conguration; and manufacturing typology make-to-order. The measures of manufacturing performance specic to this manufacturing performance indicator might include: number of design queries, time taken to answer queries, designer hours used, number of prototypes built. In a recent case study conducted in the automotive industry it was found that there were 20-30 measures of manufacturing performance for each manufacturing performance indicator. These dene the criteria which should be the subject of a benchmarking exercise. An examination of these measures and the analysis tools adopted to relate manufacturing technology and programme

Co-development chain Product configuration chain Customer order fulfilment chain Partnership sourcing chain Manufacturing process chain

Qu a ex lity ib ili ty Ti m En vi Co e ro s nm t en t Fl
Manufacturing business process chains Manufacturing typology

Manufacturing performance indicator

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Peter J. Sackett, Douglas J. Maxwell and Paul A. Lowenthal Customizing manufacturing strategy Integrated Manufacturing Systems 8/6 [1997] 359364

features to the manufacturing measures are the subject of a separate paper by the authors.

Conclusions
A framework relating business goals to manufacturing strategy has been established. The framework, in the form of a hexahedral, has widespread manufacturing business application. Alternative manufacturing typologies are accommodated.

detailed analysis relating specic manufacturing technology models to business driven measures of manufacturing performance. This facility is currently being beta tested in a range of European industrial applications.

References
Factory for the Future (1995), EUREKA Project No. 1005, Department of Trade and Industry, 151 Buckingham Palace Road, London, or Forschungszentrum Karlesruhe Gmbh, Postffach 3640, D- 76021, Karlsruhe. Hill, T. (1985), Manufacturing Strategy, Macmillan, London. Jackson, S. and Sackett, P.J. (1995), Advanced manufacturing business integration tool for Europe, Proceedings Logistics, Management and Production Organisation, EU Targeted Research Action No. 53, October, Vouliagmeni, Greece. ONeill, H. and Sackett, P.J. (1996), The extended enterprise reference framework, Proceedings BASYS 96, Lisbon, Portugal, June. Porter, M.E. (1985), Competitive Advantage, The Free Press, New York, NY. Puttick, J. (1986), Manufacturing Pull Manufacturing Push, Springboard for Competitive Advantage, PA Consulting Group, London. Sackett, P.J., Wortmann, J.C. and Browne, J. (1994), The systems of manufacturing manufacturing business challenges, Keynote Paper, Proceedings ASI 1994, ESPRIT ICIMS Network of Excellence, Patras, Greece, June. Sackett, P.J., Lowenthal, P.A., Maxwell, D.J. and ONeill, H. (1996), Business strategy and manufacturing strategy mapping the link, IJCIM, UK, awaiting publication. Trisoglio, A. (1995), Managing complexity, The Strategy and Complexity Seminar, London School of Economics, London, July . Wallace, T.F. and Dougherty, J.R. (1987), The Official Dictionary of Production and Inventory Management Terminology and Phrases, 6th ed., APICS. Wiendahl, H.P. and Scholtissek, P. (1994), Management and control of complexity in manufacturing, Annals of CIRP , Vol. 43 No. 2, pp. 533-40.

Figure 8 Manufacturing environment appropriate to Putticks (1986) Grid

Competitive dimensions

Corporate vision Enterprise mission Critical enterprise success factors

Co-development chain Product configuration chain Customer order fulfilment chain Partnership sourcing chain Manufacturing process chain

Qu a ex lity ib ili ty Ti m En vi Co e ro s nm t en t Fl
Manufacturing business process chains Manufacturing typology

Manufacturing performance indicator

The large generic framework is readily customized to a particular manufacturing business environment. This greatly reduces the potentially overwhelming decision space facing manufacturing managers. The result is a practical support tool in terms of personal level application with the ability to handle complexity in the manufacturing environment. The framework forms the basis for a benchmarking exercise and could be used as a driver for business process engineering. It provides for the subsequent

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