lecture 1 dops mfg strategy 20060913
TRANSCRIPT
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PRODUCTION STRATEGY
DESIGN OF PRODUCTION SYSTEMSTU-22.1113/1115
Eero Eloranta13.09.2006
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The elements of a strategy ina networked business
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Business model elements and underlying factors
Value offering
Customer value
Revenue model
Network
Positioning
Brand
Scale Markets, culture, laws
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Networks and positioning -alternative positions for corporate focus
Mfg SalesAftermkt.
Distrib.DesignComp.mfg.
STRATEGIC CHOICES?
Go upstream ! Go downstream !Go horizontal !
Go upstream and downstream !
Mkt. &branding
Logistics
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Networks and positioning -Extremes
Mfg SalesAftermkt.
Distrib.DesignComp.mfg.
Two extreme examples:
Mkt. &branding
Logistics
Mfg SalesAftermkt.
Distrib.DesignComp.mfg.Modus Link (OBM):
Mkt. &branding
Logistics
Mfg SalesAftermkt.
Distrib.DesignComp.mfg.Virgin (Brander):
Mkt. &branding
Logistics
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Product & service model
Productplatform
Core productIntegration
SystemsSoftare
Service
Integration withThe consumers
Compatibility
Modularity
Usability
Newapplications
Distribution
channel,brand
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Product vs.service production
Separate serviceand product biz
Services supportedby product biz
Own parts productionand assembly
Componentoutsourcing
Supplier collaboration,System suppliers
Service business tosupport product mfg
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Objectives of production Rule of thumb: cost, quality, delivery
Longer version: simultaneous achievement ofProductivity (value added/cost, pcs/person, etc.)
Customer service (e.g. availability, responsiveness)
Responsiveness (OFLT, OTD)
Controllability (lead time, program change time, DOS)
Capital efficiency (DOS, utilisation)
Flexibility (excess resources)
Agility (flexible responsiveness)Leverage to high margin and revenue (profit, cost, EBIT)
Quality (FFR, PPM, yield)
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Competitive choices according toTreacy and Wiersma (1993)
Productleadership
Operational
excellence
Customer
intimacy
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Moores business life cycle and production
Source of the illustration; Wikipedia
Productleadership
Operationalexcellence
Customerintimacy
Availability CostQuality
Agility
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The three basic competitive gamesThe three basic competitive games
Exploration gameEarly market
Product leadership strategy
Agility gameTornado, early maturity
Customer intimacy strategy
Commodity game
Mature marketsOperational efficiency strategy
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Exploration gameExploration game
Imperative: Ensure reliable delivery in spite of uncertainty intechnology and demand
Life cycle: Early market
Strategy: Product leadership
Business: Any technology push based value domain, or new valuedomains in existing businesses
Elements: Reliable product delivery in spite of immature products
Sourcing under uncertainty, purchasing under risk
Production, sourcing and distribution flexibility
Key business processes run concurrently
New product developmet process
Delivery processOrganic delivery process is a must
Note: Exploration game is the nightmare of a production professional- yet, pricing is value rather than cost based in this game!
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Agility gameAgility gameImperative: Create the fastest response E2E MTO / ATO model
customization incl.
Life cycle: Tornado, main streamStrategy: Customer intimacy
Business: Customized products, channel partner promotions, OEMdriven variants
Elements: Shortest OFLT capability including customized products
Use & leverage channel visibility with true E2E managementcapability
Capability to steer volumes and margins on-line
Customer value thresholds needed
Note: Strategic intent to gain the reputation of the preferred supplier
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Commodity gameCommodity game
Imperative: Extend cost efficiency leadershipLife cycle: Main stream, maturity
Strategy: Operational efficiency
Business: Mass distribution, e.g. Asian markets, daily consumables, PC(SOHO, small offices and homes)
Elements: Low cost, ready-to-use, partner acknowledged products
Shared planning / risk / revenue sharing btw producer andchannel partners
Direct distribution from factories to consumers
Full trucks or at least full pallets to points-of-sale
Scale matters
OFLT is not that important, OTD is!Note: Min E2E cost = flawless execution of mass production & mass
distribution!
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Production in global economics?
San Diego, California Fort Worth, Texas
Camberley, UK
Bochum, Germany
Oulu, Finland
Espoo, Finland
Tokyo, Japan
Taipei, TaiwanHong Kong
Masan, South-Korea
Tampere, Finland
Singapore
Copenhagen, Denmark
Sydney, Australia
Salo, Finland
Melbourne, Florida
Osaka, JapanDongguan, China
Beijing, China
BUSINESSES AND PRODUCTS?
Global vs. localRamp-ups & ramp downs
PLANT FOCUS?
Division by product / technology / geography?
SUPPLIERS?
global vs. local
AFTER MARKETS?
Reverse logistics
IT SUPPORT?
Transaction processing backbone?
Value adding applications?
MULTICULTURAL ENVIRONMENT
Unified vs. regional processes
Social cultures, business cultures, time zones
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0.60.811.3
31.622.22.32.6
3.43.6
55.15.3
9.711.4
14.818.518.8
2022.3
27.5
0 5 10 15 20 25 30
1
Labor cost including social costs (EUR / hour)
Source: Ari Kurikka, Nokia Networks, 2004 / Brean Murray, 2002
GermanySwedenFinlandFranceUSAUKIrelandItalyTaiwanKoreaHungaryCzech rep.PolandMexicoMalaysiaEstoniaLatviaLithuaniaSlovak rep.ChinaRussiaRomaniaBulgaria
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Global structural change:industrial production development
Source: Technology Industries of Finland 2003 / Consensus Economics, August 2003
Real change over previous year, %
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Strategic manufacturing choicesTARGET ATTRIBUTES
Product technology Mechanics, electronics, software; standardisation
Sales volumes Per product family, product
Process technology Scale, flexibility, interchangeability, interconnections
Capacity Nature, amount, timing, type
Facilities Size, location, specialisation
Vertical integration Direction, extent, balance
Vendors Number, structure, relationships, procedures, sharing
New products Personal, customised, segmented, modified, std.
Human resources Selection, compensation, competences, security
Quality Defect prevention, monitoring, interventionSystems De- / centralisation, autonomy, ambition level
Organisation Structure, control & rewarding system, staffing
Source: Hayes & Wheelwright
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Alternatives for production strategy
EXTERNALLY NEUTRAL
Achieve parity withcompetitors
EXTERNALLY SUPPORTIVE
Pursue a manufacturingbased competitiveadvantage
INTERNALLY NEUTRAL
Minimise manufacturingsnegative potential
INTERNALLY SUPPORTIVE
Provide credible support tobusiness strategy
Source: Hayes & Wheelwright
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Neutral production strategies
INTERNALLY NEUTRALMinimise manufacturingsnegative potential
Role of outside experts dominant Internal, detailed management control
systems for monitoring
Reactive mode
EXTERNALLY NEUTRAL
Achieve parity withcompetitors
Industry practice followed Investment horizon covers one
business cycleCapital investment primary means to
catch competition
Source: Hayes & Wheelwright
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Supportive production strategies
INTERNALLYSUPPORTIVE
Provide crediblesupport to businessstrategy
Investments for consistency with thebusiness strategyManufacturing strategy is formulated
and pursuedLong term trends and development
addressed systematically
EXTERNALLYSUPPORTIVE
Pursue a manufacturingbased competitiveadvantage
Anticipate the potential of newmanufacturing practices
Manufacturing involved in major mktand eng. decisions (& v.v.)
Long range program to acquirecapabilities in advance of needs
Source: Hayes & Wheelwright
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Case Elcoteq SE 1984 LohjaMicroelectronics founded to support LohjaCorporation'selectroluminescent display development production in Lohja 1990 Lohja Microelectronics unitwas incorporated as Elcoteq Oy Ab 1991 Management Buy-Out 1992 Pilot production started in Tallinn, Estonia 1993 AS ElcoteqTallinn established as a legal entity in Estonia
Printeq-Piirilevyt Oy (Printed Circuit Board production) establ. 1994 Oy JorvasPartners Ab acquired near Helsinki, Finland
- ABB Industry's electronics assembly factory acquired in Helsinki 1995 New Gunnarla plant in Lohja, Finland started production
- New Printeq factory started production in Salo, Finland 1996 Jorvasfactory closed
- Capac ity in Tal linn near ly tr ip led- Phone Repa ir Center s ta rted in Tal linn
1997 First GSM phone EMS box-build project in EMS ind. with /// inTallinn- E lcoteq Deutsch land GmbH es tabl ished- Expansion of the Tal linn fac to ry- Pilot production in St. Petersburg, Russia- L is ting on the He ls inki Stock Exchange
1998 Printeq operation was sold- New Techno logy Serv ices Un it was set up- Elcoteq acquired ABB Transmit PCB operations in Vaasa,- Elcoteq acquired KoneElevators electronics ops. in Hyvink- Purchase office was established in Tokyo, Japan- Newplan t was bu il t in Pcs, Hungary- Building of a new plant started in Monterrey, Mexico- Elcoteq & Elektrobitsign co-operation on product and tech. dvlp
1999 Mexican plant in Monterrey started operation- Purchase o f Dongguanp lant in China- E lc oteq D en mark wa s es tab li she d
2000 Acq. of Stephan Elektronik berlingen (D), incl. ops. in Ch, Pl- Acquistion on NDP's plant in Pcs, Hungary- Elcoteq Beijing Electronics was established in China- Building of second Elcoteq plant started in Tallinn- Elcoteq decided to build a newplantin Wroclaw, Pl
2001 Elcoteq divided its business into three BAs: TerminalProducts, Communications Network Equipment andIndustrial Electronics
- Acquisition of ABB electronics unit in Switzerland- Elcoteq decides to merge Helsinki and Lohja plants- Elcoteq acquires mechanical engineering unit of
Adtranz. Ch- Elcoteq decided to build new plant in Beijing, China
2002 Elcoteq and Aspocomp established technologydevelopment company Imbera Electronics Oy- Elcoteq aqcuired three-fourths of the Benefon R&D Center
into Elcoteq's wholly-owned subsidiary Elcoteq Design Center Oy- Refined strategy wasannounced in August- Elcoteq acquired IBM's 70% ownership of GKI in Cn
2003 Acquisition of NPI services company NPRC, Inc., USA- Elcoteq aqcuiredMarconi's electronics mfg.Offenburg- Acquisition of 20 percent of ISIS surface mounting- Elcoteq and Cellonenter into cooperation agreement- Elcoteq to acquire the mfg operations of Tellabs, Fin
2004 Divestment of Industrial Electronics business area- Decision to build a new plant in St. Petersburg, Russia- Elcoteq decided to open mfg operations in Ind, Bra- Elcoteq opened an international office in Zug, Ch- Elcoteq started manufacturing operations in Manaus- Elcoteq acquireda mfg facility from Thomson, Juarez, Mx
2005 Plant inauguration in Bangalore, India- Geographical Area Europes head office in Budapest- Elcoteq celebrated 10th anniversary of the Gunnarlaplant, Lohja- Elcoteq converted into a European Company (Societas
Europaea, SE)- Plant inauguration in St. Petersburg, Russia
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Case Vaisala OyjThe first actual delivery of Vaisala radiosondes to MIT in1936. This radiosonde model was complete with pressure,
temperature and humidity measurementIn the 1940's prof. Visl established a company calledMittari Oy and manufacturing facilities for radiosondesystemsIn the 1950's a modern manufacturing plant was relocated in Vantaaand radiosondes were tested further
Radiosonde production at Vaisala in the 1960's.
The world's first fully transistorized radiosonde, the Vaisalawas introduced to the market in the mid-1960's
The Vaisala CORA Automatic Sounding System wasintroduced in the early 70s
The HUMICAP Humidity Sensor was developed in the1970's, when the possibility of combining thin-film technologyand capacitive measurements was studiedThe Vaisala RS80-radiosonde (4th generation), whichutilizes the HUMICAP sensor, was launched in the1980's.
1995 the sold Vaisala Technologies Inc. (VTI) to Breed Technologies Inc. (silicon capacitive sensors for the car ind.)
1985 acquired Tycho Technologies Inc. of USA, manufacturer of upper air windprofiler
2005 the acquired Sigmet Corporation of Westford, Massachusetts, USA (weather radars)2005 acquired CLH Inc. of Minneapolis, Minnesota, USA (airport weather stations)2002 acquired Global Atmospherics Corporation of Tucson, Arizona, USA (lightning detection)2001 acquired the Meteorological Systems Unit of Radian International LLC of USA2000 the Group acquired Jenoptik Impulsphysik GmbH of Germany (airport weather stations, optical sensors)2000 the Group acquired Dimension SA of France (lightning detection, thundersorm forecasting)1999 acquired Handar Inc. of USA (meteorological and hydrological equipment)1999 acquired AIR Inc. of USA (upper air observation systems
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Case Nortel
CBC News Online | June 27, 2006
Nortel Networks, the Canadian telecommunications equipment giant, began its corporate life in1895 making equipment for traditional phone companies in Canada, a few years after Alexander
Graham Bell invented the telephone. Originally, part of Bell Telephone, it morphed into Northern
Telecom, and finally Nortel. The company remade itself as an Internet company in the 1990s.
Major changes began at Nortel when John Roth took office in 1997 as the company's president and
chief executive officer. He saw that the marketplace of communications was shifting from
telephone technology to the Internet. The trick was figuring out how to speed up the process of
getting new products and services into the market so Nortel could keep ahead of the fast-paced
Web world. In the past, it often took as long as five years to complete a research and development
project.
Nortel was dramatically restructured. Forums were created where nominated employess from
every level gathered to help make the company more in tune with the wireless and optical
marketplace. Nortel moved to outsourcing much of its production, resulting in the closure of 18 of
the company's 24 plants.
Nortel's growth was in part based on acquisitions. It went on frequent buying sprees, often using itsown stock to make acquisitions. In 2000 alone, it bought 11 companies for a total of $19.7 BUSD
Paris, September 1, 2006 - Alcatel (Paris: CGEP.PA and NYSE: ALA) announced today that it has signed a non-
binding Memorandum of Understanding with Nortel to acquire its UMTS radio access business (UTRAN) andrelated assets for USD 320 million. This is a key step in Alcatel's strategy to further strengthen its UMTS market
position, and thus expand its global leadership in broadband access.