SCM -- Chapter 8

objectives of manufacturing strategies

-satisfy demand -manage capacity efficiently -manage inventory levels -minimize cost: labor, materials, plant and equipment

manufacturing processes

1. job shop 2.batch 3.assembly line 4.continuous flow

assembly line

has standard products with a limited number of variations moving through stages of productions (cars, televisions, smart phones) -ATO/MTS

the nature of operation management

is carried out varies by company and depends on the nature of the products and/or services in the portfolio

batch

manufactures a small quantity of an item in a single production run (milk and other processed food, clothing) -MTO/ATO

manufacturing strategies

is established to satisfy customer demand while balancing manufacturing costs and inventory levels

relationship of TCM to manufacturing strategy

-procurement and production costs per unit go down as volume goes up (generally a step function applies as more capital will required to product more as volume grows) -inventory and warehousing costs per unit go up as volume goes up (must hold more inventory and pay for more storage space, insurance, taxes, etc.) -transportation costs per unit go down as volume goes up, but level off at high volumes (economies of scale in transportation until the container/conveyance is filled up)

engineer-to-order

is a manufacturing process in which the component is designed, engineered, and built to customer specifications only after the order has been received. -it is an evolution of MTO supply chain to include customization at the component level -may include some common components but the use and configuration are different every time -the essence of ETO is building a unique product every time (project management is a key skill for profitable success) -in ETO, reputation for quality and innovation are key to success (complicated technology solutions such as operations centers, stadiums, amusement rides are ETO)

A key issue of MTS

is to balance inventory and demand. companies struggle to make the correct product at the correct time in the correct quantities as forecasts are inaccurate at the detailed specification level -data analytics and current market feedback are key strategies to improve this business process

four types of manufacturing strategies

1. make-to-stock (MTS): features economies of scale, large volumes, long production runs, low variety, and multiple distribution channels 2. assemble-to-order (ATO): when sub assemblies are made, stocked to forecast, but products are not assembled until customer order is received 3. make-to-order (MTO): products are not produced until customer order is received 4. engineer-to-order (ETO): used when products are unique and extensively customized for the specific needs of individual customers the choice of strategy determines which lead time the customer experiences: customer delivery, manufacturing, procurement, product design

continuous flow

consistent manufacturing of the same product (gasoline, chemicals, laundry detergent, PC boards) -MTS

job shop

creates a custom product for each customer (artist, craftsman) -ETO/MTO

make-to-order (MTO)

is a manufacturing strategy that allows customers to purchase custom products to their specifications. -the MTO strategy only manufactures the end product once the customer places the order. lead time for customer delivery is longer and customers pay for the ability to customize. -raw material are carried in inventory with a few common sub assemblies -highly configured products such as computer servers, aircraft, ocean vessels, houses, bridges, custom furniture and custom tooling are MTO -often includes services with the product (architect, designer, technology expert)

assemble-to-order

is a manufacturing strategy where final products are produced quickly as ordered by customers. this enables products to be customized to a certain extent. -the ATO strategy requires that the main sub assemblies for the product be completed and inventoried along with the final assembly parts -often called a "postponement" strategy -similar to MTS, demand forecasting and inventory management are key process to a successful ATO process. the main sub assemblies and final configuration parts must be forecasted and inventoried -most high tech products with customization available (computers, audio systems), quick serve restaurants, and individualized products are ATO

total cost of manufacturing (TCM)

is the complete cost of producing and delivering products to your customers -it incorporates both fixed and variable costs used in the manufacturing, storage, and delivery of the product -it includes all costs associated with: production and procurement activities, inventory and warehousing activities, transportation activities -is generally expressed as a cost per unit for each product

operations management

refers to the design, execution, and control of the operations that convert resources into desired goods and services, aligned with the company's business strategy

the goal of operation management

to convert materials and labor into goods and services as efficiently and effectively as possible, while also controlling costs to maximize profits. This entails managing the process of creating the goods and services

make-to-stock (MTS)

to manufacture products for stock based on demand forecasts, a push supply chain -the accuracy of the forecasts is the key to inventory management and controlling costs. accurate demand forecast limits excess inventory and loss sales from stock outs. -most equipment intensive manufacturing (automobiles), commodities (processed foods, sundries) and low value products are MTS