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Advance Strategies in production management.pptx

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Advance Strategies in production management.pptx

  1. 1. AdvanceStrategiesinproductionmanagement M M 5 0 7 - P r o d u c t i o n / O p e r a t i o n M a n a g e m e n t P r e p a r e d b y : A l a n B . Z u l u e t a & D i x i e L . C o l i b a o
  2. 2. What? What are production strategies? Production strategies are long-term plans for the production of goods and services. They aim to achieve a central goal or objective established by a company's management team. A production strategy functions as a guide for the production department by determining the type of technology to use, the level of investment for production, the production schedule, and what kind of training the production staff may require.
  3. 3. Why? Why are production strategies important? When companies develop a production strategy, they establish a high level of preparation that informs future decisions. This strategy can help minimize risks and increase work output. Here are some reasons why production strategies are essential:
  4. 4. Why? Why are production strategies important? Provide clarity A comprehensive production strategy encourages the management team to take the time to define and decide what the company's primary goal is. This decision helps management determine the sub-goals and what actions are necessary to accomplish them. With this clarity in place, the production team can understand the objective, the scope of the project, and work together more efficiently.
  5. 5. Why? Why are production strategies important? Establish priorities Production strategies help large and small businesses determine what the priorities are in production. For example, a small company with limited resources, whether capital or personnel, can allocate them more effectively when guided by a strategy. As a result, production costs can stay low, team members can receive the support they require, and team leads understand how to prioritize functions or tasks to maintain productivity.
  6. 6. Why? Why are production strategies important? Promote adaptability Every project encounters challenges, and how a team overcomes these challenges can determine the project's outcome. When developing a production strategy, it's helpful to consider risks that may arise throughout the production cycle. Having a clear production strategy as a reference point nurtures adaptability within the team and helps them make strategic decisions, even if the unexpected occurs.
  7. 7. Typesof Productions Strategies 1. Assemble-to-order 2. Level production 3. Chase strategy 4. Make-to-stock 5. Make-to-order 6. Engineer-to-order
  8. 8. Typesof Productions Strategies Assemble-to-order Assemble-to-order (ATO) is a production strategy where companies produce products on a customer-order basis, storing their inventory as assembly-ready components. This means that companies possess the necessary parts of these goods and only proceed to assemble these items when they receive orders. As a result, companies that employ this strategy avoid stocking large quantities of products, which can help reduce inventory costs. Because production depends on the number of ordered items, businesses can typically mass- produce these items according to a buyer's specifications. This can give these companies a market advantage, as they can meet demand and provide goods or services to their clients more quickly.
  9. 9. Typesof Productions Strategies Level production Level production focuses on producing the same number of units per product at a consistent rate regardless of market demand. This strategy lowers productions costs and minimizes the risk of carrying obsolete goods. Industries with limited production capabilities and cyclical needs typically use this type of production strategy. With a level production strategy, companies can keep stocking inventory during non-peak seasons while being ready to ship at a higher volume when demand increases. For example, the fast-food industry uses a level production strategy. Companies in this industry typically function in a high-demand and low-margin scenario for the products they sell. The level production strategy ensures production consistently meets demand.
  10. 10. Typesof Productions Strategies Chase strategy The chase strategy is when a company's production matches the demand set forth by the market. This process is a lean production strategy because inventory costs stay low, and the production schedule functions on an order basis, which minimizes the risk of having unsold products. It also promotes the efficient use of manufacturing resources and ensures a company's production capacity remains flexible to adjust for market demands. The chase strategy is helpful for businesses with limited resources, and those that manufacture products for niche markets. For example, companies that produce Halloween items typically use the chase strategy. Demand for these types of products has a set timeframe. This awareness of when demand increases can help the production department adjust its manufacturing processes.
  11. 11. Typesof Productions Strategies Make-to-stock The make-to-order (MTO) strategy relies on receiving orders to manufacture products. This production method prevents businesses from creating a dependence on market demand and helps them simplify inventory control. MTO is typically present in companies that offer customization of their products, such as those producing computer hardware, industrial equipment, and automobile components.
  12. 12. Typesof Productions Strategies . Engineer-to-order The engineer-to-order (ETO) strategy is similar to MTO in that the manufacturing of products relies on first receiving orders. The one main distinction between these two strategies is that, unlike MTO, ETO involves the design or engineering of an ordered product. Companies that use this strategy may only carry an inventory of standard components, like chemicals and steel.
  13. 13. Sixstepsto Createa Production Strategy Mostcompaniesstrivetobecomebetteratadaptingtochangesinthebusiness environment.Intoday'sglobalizedeconomy,marketfluctuationsandchangesin customers'preferencesmovequicklyandarefeltinchangesinthedemandpattern.In production,thisisfeltalmostimmediatelybecausestocklevelsareusuallykeptlow. Everyonewhoworksinproductionmust,therefore,adaptandbeabletoreactquicklyto whathappensaroundus.Inmanycompanies,theemployeeshavenowbecome accustomedtothissituationandtherequirementforflexibilitycaninmanywaysbe consideredbothhealthyandnatural.Thisisapartoftheleanphilosophy.
  14. 14. Sixstepstocreatea productionstrategy Step 1: Set challenging long-term goals • Normal efficiency improvement rate is often around 6% a year. Many companies can handle this level with their normal capacity to expand. 6% a year over five years represents an improvement of 34% over the period. • This means that, if your aim is to increase productivity by only 34% over five years you will not need any development strategy to achieve it! • World-class companies manage to sustain improvements in the production of 15% a year. This equates to a doubling of production over a five-year period. If you set this type of target, you will need a strategy to succeed. Let's start creating! • Obviously one goal will not be sufficient. If you only focus on productivity increase, it is easy to come up with solutions like "tear down the factory and build a new one". You need a ceiling for investment levels, stock levels, and total costs.
  15. 15. Sixstepstocreatea productionstrategy Step 2: Identify an expert • The ideal expert is someone you trust. It could be someone who works for the company, or it could be a consultant. • The important thing is that the personal chemistry is right. Your expert must be able to work together with you and mix with your associates at all levels. • Your expert must also have a broad knowledge base. To have undertaken a similar task earlier is an obvious requirement as is being fully conversant with all aspects in the lean toolbox. If we're dealing with the production process he/she also requires an understanding of other ways of getting results, such as Six Sigma, production- related IT solutions, maintenance, and production finance. Every challenge is unique, so it's a case of not falling into the same old rut as before. • A knowledge of your specific industry is of course desirable, but the most important aspect is that your expert has experience from several industries so that he/she can distinguish between what is related to your industry and what is generally applicable.
  16. 16. Sixstepstocreatea productionstrategy Step 3: Identify where the potential is greatest • Each production strategy must be based on the company's unique situation. A company often focuses on costs and growth. It would make sense to study the financial picture to identify which area has the greatest potential. • With your expert's help, go through each area of cost and estimate how much this could be reduced, per item produced. In some industries, the greatest potential lies in reduced consumption of raw materials or energy, others in personnel costs per produced item, while, for some, the potential is in maintenance costs. Then produce a breakdown of how improved production can increase sales, for example because of improved security of supply or an improved level of quality. • Using this, you will get an indication of where to concentrate your efforts to achieve your goals and you can sharpen your focus somewhat.
  17. 17. Sixstepstocreatea productionstrategy Step 4: Draw up a thorough situation analysis The next step is to draw up a comprehensive situation analysis. This is where your expert starts working in earnest. I recommend you carry out a detailed analysis that covers the total production function. If your analysis is too superficial the strategy will only be able to recommend further studies but will not give any direction. You need to be most accurate in the area with the highest potential for financial improvement. The analysis needs to have a "hard" and a "soft" aspect. "Hard" focuses on measurable factors and outlines areas like: • Technical capacity - this includes production efficiency (OEE), stability, utilization and shift work • Costs, including costs of shortages, costs of quality and maintenance • Capitalization, setup times, lead times and batch sizes. • Bottlenecks – where and when • Layout and flow • Personnel requirement per unit or process
  18. 18. Sixstepstocreatea productionstrategy Step 4: Draw up a thorough situation analysis The "soft" analysis could, in fact, be based on interviews. It identifies other important factors that are not easily measurable. The aim is to get an idea about questions like: • Styles of working, culture and co-operation • Standardized working methods • Care and cleanliness of the equipment • How improvements are implemented The capacity and experience available to carry out the necessary projects By analyzing the final material, the strong and weak aspects can be identified. Suggestions for improvement can be documented, and we can calculate the size of the areas of high potential. Consult with personnel about the situation analysis to confirm the quality of the findings and provide them with the relevant feedback.
  19. 19. Sixstepstocreatea productionstrategy Step 5: Develop the strategy The strategy develops out of the situation analysis you have drawn up. Your expert, together with a working group, examines the different scenarios, sketches different layouts, calculates results vs. targets and assesses feasibility. This needs to be a continual process with a multi-functional approach.
  20. 20. Sixstepstocreatea productionstrategy Step 5: Develop the strategy One set of tools is seldom sufficient to attain your goals. Instead, you often need all the relevant tools to achieve your aims efficiently. A few examples of what could be included in a development strategy are concrete strategies for: • Improving the stability of the process by, for example, using statistical methods to fine-tune the operation and introduce an automatic overall control • Identifying which key data are the most relevant e.g. OEE measurement • How and whether IT support should be used to support decisions based on facts, optimization and to automate labour-intensive processes • How bottlenecks come about and where investment is called for • How to improve layouts and flows to minimize the number of unnecessary operations and free up floor space for new production • How lead times and tied-up capital can be reduced e.g. by examining set-up times, paced flows, leveling and introducing a Kanban system
  21. 21. Sixstepstocreatea productionstrategy Step 5: Develop the strategy One set of tools is seldom sufficient to attain your goals. Instead, you often need all the relevant tools to achieve your aims efficiently. A few examples of what could be included in a development strategy are concrete strategies for: • Improving the stability of the process by, for example, using statistical methods to fine-tune the operation and introduce an automatic overall control • Identifying which key data are the most relevant e.g. OEE measurement • How and whether IT support should be used to support decisions based on facts, optimization and to automate labour-intensive processes • How bottlenecks come about and where investment is called for • How to improve layouts and flows to minimize the number of unnecessary operations and free up floor space for new production
  22. 22. Sixstepstocreatea productionstrategy Step 5: Develop the strategy • How lead times and tied-up capital can be reduced e.g. by examining set-up times, paced flows, leveling and introducing a Kanban system • The feasibility of releasing operators from machines and pure supervisory tasks so that they can operate several machines or prepare for the next order. • How reliability can be improved by expanding maintenance tasks However, it is not sufficient to list some measures. One needs to outline what must be done, when and what level of resource will be required for each of the measures.
  23. 23. Sixstepstocreatea productionstrategy Step 6: Visualize and confirm the development strategy Visualize the development strategy so that it is easy to understand. This can be done using a gant chart of the most important tasks, creating a 3D image of the new layout and producing effective presentation material.
  24. 24. Implementation Thestrategyshouldnotbeconsideredtobemerelyadocumentthatisbeingusedtostartsome projects.Itshouldprovidesupporttoensurethattheeverydayoperationalandtacticaldecisions proceedintherightdirection-thedirectionyouhaveagreedisbestforthelong-terminterests. Astheheadoftheproduction,yourresponsibilityistoensurethattheorganizationhasthe prerequisitestoachievetheobjective,andyougetthewhere-with-alltoplanandreactlong-term. Yourexpertsupportsyouandthecompanyalongthewaywithtraining,coachingandadvice.

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