Lecture 1 DOPS Mfg Strategy 20060913

8/14/2019 Lecture 1 DOPS Mfg Strategy 20060913

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Mfg_strategy_060913 / Eero Eloranta / 1

PRODUCTION STRATEGY

DESIGN OF PRODUCTION SYSTEMSTU-22.1113/1115

Eero Eloranta13.09.2006


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


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


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


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


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


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


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


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, %


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



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



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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



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


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.

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Lecture 1 DOPS Mfg Strategy 20060913