Manufacturing Strategy: Make or Buy Decisions

Manufacturing Strategy
POSTGRADUATE ENGINEERING AND MANAGEMENT PROGRAMME (PEMP)

ASSIGNMENT
Centre Name: MME
Course Name: M.Sc (Engg) in EMM
Name of the Student : Arun Joseph.A
Student Registration No : BUB0910015
Module Leader at MSRSAS : Prof.V.G.S Mani
FULL TIME 200 BATCH
M. S. Ramaiah School of Advanced Studies

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M.S Ramaiah School of Advanced Studies –Postgraduate Engineering and Management Programme (PEMP)
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Student Name Arun Joseph.A
Reg. No BUB0910015
Course EMM Batch FT10
Module Code EMM501
Module Title Manufacturing Strategy
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Postgraduate Engineering and Management Programme- Coventry University (UK)
Assessment Sheet
Department MME
Course EMM Batch Full-Time 2011
Module Code EMM501 Module Title Manufacturing strategy
Module Completion
Module Leader Prof.V.G.S Mani Date
29-01-2011
Student Name Arun joseph.A ID Number BUB0910015
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Abstract
Today’s industries growth and competitiveness not only depends on skill and domain
knowledge, it requires an effective co ordination of all department and functional area. To
bring these diverse functionaries to a single umbrella management need to provide a vision.
Strategise are moulded by top management as per the customer they are serving and the
challenges they face to produce out come.
A manufacturing strategy is a critical component of the firm's corporate and business
strategies, comprising a set of well-coordinated objectives and action programs aimed at
achieving a long-term goal. A manufacturing strategy should be dependable with the firm's
corporate and business strategies, as well as with the other managerial functional strategies.
Part A is a debate on make or buy decision is strategic or non strategic. Using the case
study the make or buy decision explained as strategic reason. By consideration with factors
such as social, political, economical and environmental. A case study of Edge cam elaborated
to understand how the decision for buying a 5 axis machine is taken strategically.
Part B first part of the assignment is the implementation and analyze of manufacturing
strategy and role of IT in its success. The various tools used to evaluate manufacturing
strategy have been explained. In second question product life cycle management and BCG
matrix are used to find the position of a popular brand Parle G in the market. The
characteristic of the maturity stage has been related to Parle G. The suitable production
system for manufacture the product is justified. In the third question the steps necessary to
become a WCM has been discussed. The case of Lucas TVS explains the need of
implementing new strategy in the organization and shows how the strategy helps the
organization to become World class manufacturer (WCM).
Table of Contents
Abstract ................................................................................................................................. i
Table of Contents .................................................................................................................. ii
List of Figures ...................................................................................................................... vi
List of Table ........................................................................................................................ vii
Nomenclature ..................................................................................................................... viii
CHAPTER 1 ......................................................................................................................... 1
1. Introduction of Make or Buy: ......................................................................................... 1
1.1 Strategic decision: ............................................................................................... 1
1.2 Non- strategic decisions: ...................................................................................... 1
Problem statement:......................................................................................................... 1
1.3 Stance taken: Make or Buy decision is a strategic reason [3] .................................... 1
1.4 Some important considerations for a strategic reason:[1] .......................................... 2
Highly entry barriers: ..................................................................................................... 2
Supply assurance:........................................................................................................... 2
Secured outlets: .............................................................................................................. 2
1.5 Case study: Edge cam............................................................................................... 3
1.5.1 Make or Buy decision: ........................................................................................... 3
1.5.2 The factors deciding of developing in-house or buy it from out: ............................ 3
1.6 Conclusion: .............................................................................................................. 3
CHAPTER 2 .................................................................................................................. 4
2. Manufacturing strategy: ................................................................................................. 4
2.1Need for Evaluation of manufacturing strategy:[5] .................................................... 4
ii
2.2 Areas to be evaluate in manufacturing strategy:[2] ................................................... 5
2.2.1 Human resources: .................................................................................................. 5
2.2.2 Organizational structure and control: ..................................................................... 5
2.2.3 Design & Engineering: .......................................................................................... 5
2.2.4 Production, planning & control: ............................................................................. 5
2.2.5 Process technology: ............................................................................................... 5
2.2.6 Sourcing (vertical integration): .............................................................................. 6
2.2.7 Sales & Marketing: ................................................................................................ 6
2.3 Strategy Evaluation tools: ......................................................................................... 6
2.3.1 Experimental methods: .......................................................................................... 6
2.3.2 Thin slicing: .......................................................................................................... 6
2.3.3 Activity based costing (ABC): ............................................................................... 6
2.3.4 Balance score card (BSC): ..................................................................................... 7
2.4 Performance evaluation tools: .................................................................................. 7
2.5 Role of IT in evaluation:[5] ...................................................................................... 7
2.6 Example: Role of IT in Manufacturing (ERP): ......................................................... 8
3.0 Product Life Cycle (PLC): ........................................................................................... 9
3.1 Product selection: Parle G biscuit: ............................................................................ 9
3.1.1 Product Life Cycle of Parle G:[8] .......................................................................... 9
3.1.2 Strategies followed by Parle G: For sustain in Market ......................................... 10
Porters 5 Model:........................................................................................................... 10
SWOT analysis: ........................................................................................................... 11
Product strategy: .......................................................................................................... 11

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Pricing strategy: ........................................................................................................... 11
Marketing strategy: ...................................................................................................... 12
3.2 BCG matrix of Parle G: .......................................................................................... 12
3.3 Suitable manufacturing system: Parle G ................................................................. 13
3.3.1 Equipment paced line flow production system: Parle G ....................................... 13
3.3.2 Some importance factors of Equipment paced line flow:[2] ................................. 13
4. World Class manufacturing (WCM): ........................................................................... 14
There are 3 principles behind World Class manufacturing:[13] .................................... 14
4.1 Seven steps to become world class manufacturing: ................................................. 14
4.2 Hierarchy of World Class Manufacturing:[14] ................................................... 15
4.2.1 Business and Operations Strategy: ....................................................................... 15
4.2.2 Organization design, Human resources, Technology and Performance

measurement: ............................................................................................................... 15
4.2.3 Information systems, Management direction, Operation capabilities: ................... 16
4.2.4 Quality: ............................................................................................................... 16
4.2.5 Customer service: ................................................................................................ 16
4.3World class Benchmarking: ..................................................................................... 16
4.4 Case study: Lucas TVS Ltd.[16] ............................................................................. 17
4.5 Journey towards World class manufacturing: .......................................................... 17
4.5.1 Implementation of new strategy: .......................................................................... 18
4.5.2 Problems faced during the implementation: ......................................................... 18
4.5.3 Result Outcomes: Lucas TVS .............................................................................. 20
5.0 Conclusion: ............................................................................................................ 20
iv
CHAPTER 4 ....................................................................................................................... 21
4.1 Comments on Learning Outcome: .............................................................................. 21
REFERENCES ................................................................................................................... 22
BIBILIOGRAPHY.............................................................................................................. 24
v
List of Figures
Figure1. 1 Framework for Make or Buy decision [4] ............................................................. 2
Figure2. 1 Role of ERP in business[6] ................................................................................... 8
Figure3. 1 Product Life Cycle curve[7] ................................................................................. 9
Figure3. 2 Product Life Cycle of Parle G[9] ........................................................................ 10
Figure3. 3 BCG matrix of Parle G[10] ................................................................................. 12
Figure4. 1 Process or Functional layout[16] ........................................................................ 19
Figure4. 2 Product or Cellular layout[16] ............................................................................ 19
vi
List of Table
Table2. 1 Performance measurement tools[5] ........................................................................ 7
vii
Nomenclature
Acronyms
BCG Boston Consulting Group
ROI Rate of Interest
IT Information Technology
JIT Just-in-time
PLC Product Life Cycle
TPM Total Preventive Maintenance
TPS Toyota Production System
WCM World Class Manufacturing
TQM Total quality Management
ERP Enterprise Resource Planning
viii
CHAPTER 1
1. Introduction of Make or Buy:
Make or Buy is a strategic decision about producing a part or product internally or

buying it from outside suppliers. The choice involves both qualitative (quality control) and
quantitative (relative cost).Make or Buy decision normally occurs, when a company has been
developing or modifying a product. And it also determines, there is a trouble with suppliers,
incapable capacity and changing demand. Make or Buy decision is carried out at the strategic
and operational level.
1.1 Strategic decision:
The make or buy decision need to be relate a company’s market and reflected in
course of action and their outcomes. Example: Dell computers had a capability of quick
response to customer orders and they didn’t found this with their suppliers.
1.2 Non- strategic decisions:
Make or Buy decision also a non- strategic decision, when the firm is not looking
forward to review the older decision. The existing decision leads to lack of enthusiasm to add
new tasks and avoiding short – term problems against taking suitable reviews.
Problem statement:
Make or Buy decision in an organization is never optimized for strategic reasons; it is

usually a non- strategic factors that decide the course of actions.
1.3 Stance taken: Make or Buy decision is a strategic reason [3]
Strategic reason is more long-range than the operational level. The decision also
includes the analysis of future, as well as the current situation. Some of the issues like
government regulation, competing firms and market trends have all strategic impact on the
make or buy decision. The reason for taking strategic decisions which doesn’t meet the
following characteristics:
 The part which is critical to manufacture, due to accurate view from the customers
 The part requires specialized design and manufacturing skills to produce
 High volume ( less capacity to manufacture)

 Process technology (The firm doesn’t interest to share for their core competence)
1.4 Some important considerations for a strategic reason:[1]
Highly entry barriers:
The wide span of process in the industry brings advantages of entry barriers. The long
span of process in an organization will raise the financial and managerial resources, which
required competing in a market.
Supply assurance:
The supply of critical materials is significant for a company, which will justify the
investment involved. The outsourcing of critical materials is much important decision of the
company. They have to decide their advantages and disadvantages of backward integration.
Secured outlets:
Likewise supply of parts assures backward integration, secured outlets have been
obtained from forward integration. This will gives the feedback for improving and leads to a
position of being aware of demand changes and also increase the opportunity to do forecasts.
Figure1. 1 Framework for Make or Buy decision [4]
2
1.5 Case study: Edge cam
Edge cam is a leading manufacturer of computer aided manufacturing (CAM) system.

In the year 2005the main challenge faced by the company was to take a decision on the
development of 5-axis capability for large users and also attract new customers. The case
study shows about the challenges faced by the company in taking a make-or-buy decision.
1.5.1 Make or Buy decision:
For several many years the machine tools have been available with 4 or 5 axis, which
can be affordable by large manufacturers. Edge cam had a very good development and they
were always developing tool path algorithm in-house, rather than use components. So the
firm decided to invest for developing 5-axis at in- house. However the firm also considers
what all the parts have to buy are and confirms the availability.
Finally the development team proves they are capable to complete the project and
manufacture a 5-axis machine at the competitive level. And the team gained the application
knowledge over more than 10 years hardly work with end users.
1.5.2 The factors deciding of developing in-house or buy it from out:
 Time to market
 Cost – short and long-term
 Development risks ( Product with new technology)
 The ongoing commitment to developing the product
1.6 Conclusion:
Make or Buy decision in an organization is a strategic reason rather than consider as a

non-strategic reason. The above case study shows the Make or Buy decision is the strategic
decision in the organization. And it shows the important factors to be considering in the make
or buy decisions. Make or Buy decision is the strategy decision, it has to combine with
business strategy of an organization.
3
CHAPTER 2
2. Manufacturing strategy:
A Manufacturing strategy is the study of long term goals and objectives of an

organization, and the approval of set of actions and the allocation of resources necessary for
attaining these goals. This strategy has been classified into 3 major levels:
 Corporate strategy
 Business strategy
 Functional strategy
2.1Need for Evaluation of manufacturing strategy:[5]
The best formulated and implemented strategies become outdated unless evaluate
them. It is essential for an organization to review, evaluate and control the strategic planning.
Strategic evaluation is important in an organization because:
 It helps to attain the long term advantages through manufacturing which is pressurized
on short term goals.
 Strategy evaluation is important for any kind of organization, timely evaluation is
essential for an organization to overcome from the difficulties before it reaches to the
critical situation.
 Strategy evaluation includes three basic activities:
1. Examine the current position of the firm’s strategy
2. Identifies the process flow, performance targets and collect data.
3. Comparing them with the expected results
4. Taking corrective actions to measure the performance which is used to
achieve the goal
 Strategy evaluation is a complex process; giving too much importance for strategy
evaluation is expensive. But too little evaluation can create difficult problems.
Strategy evaluation helps to achieve the corporate objectives.
 Evaluation of strategy initiates the organizational members to take corrective action
when there is a diversification of success factors.
 The decision obtained from the strategic planning is significant in an organization.
Incorrect strategic decisions push the organization in difficult situation.
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2.2 Areas to be evaluate in manufacturing strategy:[2]
 Human resources
 Organizational structure and control
 Design and Engineering
 Production, planning and control
 Process technology
 Sourcing(vertical integration)
 Sales and Marketing
2.2.1 Human resources:
Factors such as skill level, wages, amount of training, promotion policies, level of
supervision, employment security are made as part of manufacturing strategy.
2.2.2 Organizational structure and control:
Decisions based on relationship between groups of employees in production,

operating policies, control policies, employee input for decisions, type of organizational
structure.
2.2.3 Design & Engineering:
It concerns new product development, product varieties, and ECN notes. The
designers must understand the demands need for product design. Manufactures must give
significant inputs to the design department.
2.2.4 Production, planning & control:
This consists of production scheduling, flow of materials coordinating with other

departments, cycle time, preventive maintenance, update the design changes and planning of
new products into the production.
2.2.5 Process technology:
Process technology deals with selection of appropriate process, nature of the

production process, type of equipment used, amount of automation, quality practices
development of new technologies, factory layout and the characteristics between levels of the
production process.
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2.2.6 Sourcing (vertical integration):
It is mainly focuses on amount of vertical integration, make or buy decisions,

relationship with the suppliers, responsibilities hold by suppliers e.g.: design, cost, quality.
2.2.7 Sales & Marketing:
It is mainly focuses on customer satisfaction, price fixing of the product, competitive

environment, advertising, giving importance to feedbacks; increase the delivery channels and
diversification.
2.3 Strategy Evaluation tools:
Strategy evaluation tool is used to review the internal and external factors related with
present strategies, measuring performances and to take corrective actions for that. The
various types of evaluation tools are:
2.3.1 Experimental methods:
1. Research method: This method consists of pattern of questions which is used to

measure the manufacturing strategy.
2. Theoretical methods: Here the experimented questions have been converted into
theoretical model with the help of analysis. This tool is having some fluctuations,
used for both data collection and analysis.
3. Hypotheses: It expresses the relationship between the obtained variables.
2.3.2 Thin slicing:
Thin slicing is one of the techniques, used to measure the implementation of strategy.
Thin slicing means takes quick decision with small amount of information. It requires
experienced persons from their domain. The advantages and disadvantages have been easily
identified with the decision of minor importance.
2.3.3 Activity based costing (ABC):
The ABC method is used as a tool to understand the product, customer cost and profit
of the company. This tool is used to identify the various resources in an organization. It
allocates the organizational resource costs to the product and services which has been supply
to the customers. More importantly ABC tool has been used to support strategic decision
through pricing of the product, outsourcing, and identification measurement of process
improvements.
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2.3.4 Balance score card (BSC):
The BSC tool is used to measure the performance of the various operational activities
which requires meeting their vision and strategy. This tool is not only focusing on financial
activities, but also the operational, developments and marketing. The organization also
enforces to measure the factors influencing financial outputs like process performance, skills
development, long term training and market share.
2.4 Performance evaluation tools:
Table2. 1 Performance measurement tools[5]
Department Measurement Tools

Performance on skill level, Wage rates, Absenteeism,
Human resources
Turnover
Innovation rate, Product life, Respond to market,
Design & Engineering
Time to market
Manufacturing Productivity, Cycle time, JIT, Process control,
operations Breakdown schedules
Parts Per Million(3.4 PPM), Quality records, QC
Quality
tools (SQC, FEMA)
Sourcing Communication, Lead times, Integration
Customer satisfaction, Benchmarking, Market

Sales & Marketing
surveys, Advertising
Finance Profit margins, Share, R.O.I
2.5 Role of IT in evaluation:[5]
Information technology has emerged as an agent of integration and key enabler of

competitiveness among all the companies in the global market place. Before the evaluation of
information technology, the knowledge was existed in human beings through capital
investment. The information technology is having impact on all industries in service as well
as in manufacturing. It deals with all the level of organization from top to bottom level
management.
Computer based control systems combined with manufacturing technology such as
robots, machine tools and data entry tools. Engineering design through CAD tools allows an
organization to make high quality designs at faster rate. Computer based production planning
7
and a control system helps to deals with complex situations and makes products with
efficiency. The information technology integrates engineering, manufacturing and business
activities together. This helps to respond customer demand with low cost and high quality.
The 3 era of information technology categorized as in 1960 (Data processing), 1970-
80(Management information systems), 1980-90 (Strategic information systems).Information
technology plays a vital role for taking strategic decisions. The integration of applications
such as enterprise resource planning (ERP), material resource planning (MRP), supply chain
management and customer relationship system with the performance management and
business strategies confirms firm’s operation excellence.
2.6 Example: Role of IT in Manufacturing (ERP):
Enterprise resource planning (ERP) integrates internal and external management

information’s across the entire organization like finance, manufacturing, sales and service
etc.It helps to assist the flow of information between all the departments in the organization
and suppliers or distributors. Although ERP act as a central database, it can be monitored by
all the departments of the organization. This soft tool is used to link end to end process
together, shows the functional relationship between the processes. The transparency of this
tool improves coordination and efficiency of the process and the product.
Figure2. 1 Role of ERP in business[6]
Today these integrated software deliver service, enables the process with greater
scopes at corporate level and national level to manage their whole business networks of
customers, suppliers and collaborators. This progress can create business more competitive in
the global market.
8
3.0 Product Life Cycle (PLC):
Product Life Cycle is based on the biological life cycle. Product Life Cycle is the
marketing theory in which products follow a sequence of phases from development, growth,
shakeout, maturity, saturation and decline. A product’s sales follows these sequence of stages
over the time of production. The product life cycle determines the performance and business
strategy of the organization. The product life cycle curve may be different for different
products; some might not reach the growth or maturity stage. An organization requires
several attempts over the year to define the stages in the product life cycle.PLC although
manages the entire process of the product right from concept, design & development,
manufacturing, service and delivery. The length of the life cycle is decreasing for an
increasing number of products.[7]
Figure3. 1 Product Life Cycle curve[7]
3.1 Product selection: Parle G biscuit:
Parle product has been India’s largest manufacture of biscuits, sweets and snacks for
almost 80 years. They introduced Parle G in 1939 with small manufacturing unit at Mumbai.
They are the largest seller of biscuits (Parle G) around the world. The product came up with a
slogan Parle G – G for ‘Genius’ The product had a unique identification of covering cream
colours yellow stripped wrapper with a cute baby photo containing 10-12 biscuits. The great
taste, high nutrition and the international quality makes Parle G a winner in the market.
3.1.1 Product Life Cycle of Parle G:[8]
The product life cycle of the any products determines how well the products perform
in the market. The Parle G had a consistent growth in the market, right from the introduction
stage due to maintain the vision of high quality with low cost. At present Parle G is in
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maturity stage and denotes the product is going strong. They almost captured most of the
Indian market and survive well against the competitors. Made differentiation in the products
like improve quality, styling and product features are the key factors to sustain in a maturity
stage. The distribution of product is very well in the market, because if distribution fails it
may results in lost during the maturity stage.
SALES
TIME
Figure3. 2 Product Life Cycle of Parle G[9]
3.1.2 Strategies followed by Parle G: For sustain in Market
 Porters 5 model
 SWOT analysis
 Product strategy
 Pricing strategy
 Marketing strategy
Porters 5 Model:
Parle G follows porters 5 model which consist of:
 Threats of substitute – Tradition homemade foods, Bakery products
 Threats of new entrants - Advertising, Network.
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 Bargaining power of suppliers – Wheat, sugar, increasing price.
 Bargaining power of customers – Alternate low cost product, Bakery.
 Competitive rivalry – High completion among the exiting players.
SWOT analysis:
STRENGTH WEAKNESS
 Brand name  Dependent on retailers and groceries
 Diversification of Product
 Dependent on lead brand( Parle G)
 Good distribution network
 Requires stores for diversified Parle
 Low and medium range products
 Understand customer mind
OPPORTUNITIES THREATS
 Estimated annual growth of 20%  Increased production cost due to hike

of raw material cost
 Changing consumer preference
 Local bakery products
 Diet biscuit
 New entrants like ITC, etc
Product strategy:
Parle introduced new products based on their cost, for sustain in the market and
diversification of new products. They introduced some other brands like monocco, hide&
seek krack jack, etc.
Pricing strategy:
Parle G had the pricing strategy of providing good quality product with low cost. This
helps to capture the large market, which is around 40% of share from rural and urban
presently.
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Marketing strategy:
Parle G uses the advertisement as a key strategic factor to promote the product in all
locations of the market. This helps to attach with peoples emotion’s right from the beginning.
The ways in which they advertise the product are:
 Sponsored the tele-serials (Shaktimaan – which impacts more around the childrens)
 Providing dream contest ( Scholarship, fly to plane,etc)
3.2 BCG matrix of Parle G:
The BCG growth share matrix is a portfolio planning developed by Boston consulting
group in 1970.It displays growth rates of various business units of growth rate vs. market
share. The BCG matrix is classified into four business group’s cash cow, star, question mark
or problem child, dog. The BCG matrix of Parle G displayed below:
Figure3. 3 BCG matrix of Parle G[10]
The Parle G is in star business group, which is having high market growth and high
market share. Stars are the leader in the business. Star generates large amount of cash because
of their strong market share, but also consumes large amount of cash due to high growth rate.
So the Parle requires high range of investments for capture large market share. Although the
Parle G maintains it market share rigidly, it will become cash cow when the growth rate
declines. There is need of some strategy attempts to hold the market share.[11]
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3.3 Suitable manufacturing system: Parle G
Since the product (Parle G) is in maturity stage, the demand for the product is high.
Customer expectations of high quality with low cost push the Parle G in high demand. The
suitable production system for Parle G is the equipment-paced line flow system.
3.3.1 Equipment paced line flow production system: Parle G
Equipment paced line flow system is used to run a production in high rate due to
demand of high volume products. It is the best production system for Parle G to design,
manage, and operate high levels of cost, quality and delivery outputs. The equipment paced
line flow is divided into 6 sub systems such as human resources, organization structure and
planning, sourcing, production, planning and control, process technology and facilities.[2]
Equipment paced line flow system produces high volume of products, which creates
great benefits for learning and do improvements. This production system gives good
manufacturing outputs through:
 Performance – Demand on high volumes enables to produce products more
efficiently
 Delivery – The delivery of the product is fast due to synchronization and use
of specialized machines
 Flexibility & Innovation – Highly specialized machines and fixtures results in
difficult to introduce a new product. So the level of flexibility is
low.
 Cost & Quality - Due to requirement of high volume products, the employee
enables to make products high –quality with low cost.
3.3.2 Some importance factors of Equipment paced line flow:[2]
 It produces variety of products with high volume
 Material flow will be smooth and regular
 The line layout system is followed, where the different types of equipment is used to
produce one product. The production rate is also high
 Unskilled labour force is enough due to the use of specialized machine
 The organizational structure is hierarchical and bureaucratic leadership style is

followed
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4. World Class manufacturing (WCM):
World class manufacturing sounds like an easy concept to understand. Goods,

services, and processes are ranked by customers and industrial experts to be among the best.
World class manufacturing is a process driven approach, where the term consists set of
concepts, policies for managing and operating a manufacturing company. A position of
international manufacturing excellence has been obtained by developing culture based factors
like continuous improvement, zero defects, just-in-time (JIT) and total quality management
(TQM). It is mainly focuses on continual improvement in quality, cost, lead time, flexibility
and customer service.[12]
There are 3 principles behind World Class manufacturing:[13]
 Elimination of Wastes by just-in-time or lean manufacturing. Waste means any

activity which adds cost but not value to the product through excess production, stock,
inactive work in progress, unnecessary movement.
 Total Quality management (TQM) – Zero defects in processes, information such as
bill of materials and stock records. Lean manufacturing techniques to achieve 3.4
PPM.
 Total Preventative Maintenance (TPM) – Reduction of production stoppages due to
equipment failure.
4.1 Seven steps to become world class manufacturing:
 Focus on competitive quality

 Implement lean manufacturing
 Achieve cost efficiency
 Reduce time - to – market
 Exceed customer expectations
 Streamline outsourcing process
 Manage the global enterprise
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4.2 Hierarchy of World Class Manufacturing:[14]
World Class Manufacturing
Customer Service
Quality
Information Systems, Management Direction,

Operation Capabilities
Organisation Design, Human Resources,

Technology and Performance Measurement
Business and Operations Strategy
4.2.1 Business and Operations Strategy:
All world class manufacturers should have their mission statement, which shows the
definition of business. This is also called corporate strategy, defines where the organization
has to compete and determines the long term objectives. Mission statement is the framework
for the strategy formulation.WCM requires involvement of everyone from suppliers to
workers. Therefore indication of all these in business and operation strategy helps to attain
WCM.
4.2.2 Organization design, Human resources, Technology and Performance

measurement:
A world class manufacturer integrates all elements of manufacturing systems in an

organization. The WCM works to eliminate organizational barriers and helps to reach their
core values to reach world class status. The world class companies invest good relationship
with their employees, providing major training than their competitors. Combination of lean
principles and employee participation leads to become a world class manufacturer. Therefore
15
most of the companies succeed by implementing world class tools such as JIT, TQM, TPM,
and MRP.
4.2.3 Information systems, Management direction, Operation capabilities:
World class manufacturers requires greater information system for analyze the
customer feedback, designing, manufacturing, and delivering world class quality products.
Management is responsible for directing the organization to a world class status. The
objectives of world class status analyze management’s ability to learn, adapt and innovate
faster in the competitive global market. The manufacturers are concerned whether their
operation systems have ability to meet design specifications rather than evaluating the
quantity. Using the available resources, the company must have the capability to produce the
right quality, the right quantity, at the right time and at the right place.
4.2.4 Quality:
Quality is foremost importance for all the manufacturing sectors."Zero defects" is the
goal of the world class manufacturers. In order to achieve zero defects , the world class
company is educated in and fully implemented statistical quality control(SQC), statistical
process control(SPC).
4.2.5 Customer service:
The customer satisfaction is pursued by obtaining product quality, order processing,

delivery, quick response to changes and service after the sale. The goal of WCM is to
increase customer satisfaction, loyalty and ensure long term profitability.
4.3World class Benchmarking:
Benchmarking is the process of identifying best practice both in products and the
processes by which those products are created and delivered. World class manufacturers set
their benchmarks by achieving:
 Overall Equipment Effectiveness (OEE) of 85%.
 Quality level of 3.4 PPM
 Value added to lead time ratio of 1 to 20
 Implementing of 10 suggestions by a employee per year
 Cost reduction of 10% per year
16
4.4 Case study: Lucas TVS Ltd.[16]
Lucas TVS was established at Chennai in 1961 as a joint venture of Lucas Varity
(UK) and T.V Sundaram Iyengar and sons (TVS), India to manufacture auto-electric
components. Lucas TVS is one the largest independent supplier of automotive products like
starter motor, alternator, wiper motor, fuel injection pump etc. It reaches all segments of the
automobiles such as passenger car, commercial vehicles, trucks, jeeps, two wheelers,
highway vehicles and even marine applications. The company had a turnover of $233 million
USD in 2003-2004.Lucas TVS has been certified under TS 16949, ISO 14001, ISO 9000, QS
9000 and Deming prize from Japanese Union of Scientist and Engineers (JUSE).Today 3 out
of 4 vehicles are fitted with Lucas TVS products.
4.5 Journey towards World class manufacturing:
Early at 1985 the manufacturing strategy of the Lucas TVS were followed by
predetermined standards. The plant was initially organized by process layout, where all the
machines and operators for the individual process are located together. It means for any
single product if we mark in the first operation it will take more than a month to complete as
a final product. Since the plant was controlled process layout, there were lot of criss-crossing
of materials across the factory. The managers also encouraged the workers to produce more
inventory level of both work-in-progress and finished goods for utilization of machines. Due
to little importance on every process, the company experienced delay of product deliveries.
The CEO also addressed there is need for change by introducing new products due to entry of
several automobile sectors like Maruthi Udyog Ltd in India. And also the entry of world class
manufactures like Bosch and Nippon-Denso put pressure on Lucas TVS to remain
competitive by means of quality, price and delivery. The top management addressed few
factors which help to become a world class manufacturer:
 Maintain less inventory
 Deals with variety of products
 Follow small batch production
 Quick change over time and reduce cycle time
 Deliver product at right time with high quality
And also delivers the importance of Toyota Production System (TPS) and various
systems approaches towards manufacturing. There is a need of innovation in areas of design
and manufacturing regardless doing outsourcing. Looking forward to WCM, the top
17
management formed the 3 member’s team. They studied the variables and the track record
has been monitored. For the first six months team visited to several world class manufactures
around the world and perceived training on implementation of modern production system.
After they came to India and spent another six months for tracking and analyzing
irregularities in the company. It was noticed that the organization is followed a function
layout (process) for manufacturing, means equipment of same type is located in the same
area. At the end of the study they set a strategy of reducing inventory, scraps, and reworks by
50% and increase the customer satisfaction in a span of 3 years.
4.5.1 Implementation of new strategy:
The management expected to implement product layout or cellular layout at full

swing. The cellular layout means the different types of equipment and processes require to
manufacture are located in the same area or department. Here the management facing
problem from employees at all levels for changing their mindset towards the new
implementations. The management recognized the importance of their workers and decided
to give appropriate training for that. And also promised if the company meets the vision
(WCM) there will be a right appreciation through rewards and promotion.
After getting the potential support from the employees, the organization implements
the product layout and various modern techniques to become the world class manufacturer.
Eliminating the non-value added activities such as excess inventory, waiting time between
the processes by implementing Toyota Production System (TPS). The changeover was first
pilot tested in the alternator unit, because alternator was a key product and the demand was
more from the Maruthi at that time. The changes gave the positive results and the
management decided to apply on all other products.
4.5.2 Problems faced during the implementation:
Although it was not an easy job to change the layouts without stop the production,
because there is a need of products. The management determined there should not be
disturbances for delivery schedule of product to the customers. They took a decision to carry
out layout changes during the week ends. It requires extraordinary level of planning at the
operating level and provides alternative machines for production during changeover. It took 5
years to complete the layout changes of the whole plant and exceed 2 years than the targeted
time. They realize the delay of changes due to lack of experience in such massive
transformations.
18
Figure4. 1 Process or Functional layout[16]
Figure4. 2 Product or Cellular layout[16]

19
4.5.3 Result Outcomes: Lucas TVS
Therefore the product layout eliminated the criss - crossing of material across the
factory and provides even flow of products. The flexibility of the process is attained and the
changes helps to provide more floor space, which was used for improve inventory turns. In
sixth year the salary of the employee were doubled with small work – force size. The
Information technology also copes with various stages of the company and enable them a
World Class Manufacturer (WCM).
5.0 Conclusion:
The evaluation of manufacturing strategy is important to achieve the mission and

vision of the company. The need for evaluation is used to measure performance of all
activities in the company. The IT plays a vital role for the evaluation of manufacturing
strategy.
. The product life cycle determines the performance and business strategy of the
organization. The various stages of the PLC indicate the Parle G manufactures to take
strategy attempts for sustaining in the market. The BCG matrix shows the Parle G growth rate
vs. market share. There is a need of suitable production system for meet the customer
demands. The equipment paced line flow is suitable to meet Parle G schedules, because of
high production capacity.
World class manufacturing is a process driven approach, where the term consists set
of concepts, policies for managing and operating a manufacturing company. The case study
of Lucas TVS shows how the company implement the new strategy, by changing the process
layout to product layout. The result shows the benefits of change over and how they become
WCM by implementing various improvement techniques.
20
CHAPTER 4
4.1 Comments on Learning Outcome:
 Manufacturing strategy module helps to understand the need of strategy in the

organization
 The importance of corporate & business strategy, mission, vision and goals have been
very explained
 The importance of PLC and BCG to identify the position of any product shown very
well.
 The business economics and cost management helps to know about the significance of
various costing activities involved in the company
 The importance of IT in the manufacturing system through ERP has been explained
and how it helps to synchronize and communicate in all the departments
 The assignment helps to know the importance of make or buy decision.
 The need for evaluation of manufacturing strategy
 The importance of PLC and BCG for determine the product in the market
 The strategies required to change the organization as a World class manufacturer.
21
REFERENCES
[Referring a Book]
[1] Terry Hill, Manufacturing strategy, 2nd Edition, Irwin/McGraw, edn, 2000.
[2] John Miltenburg, Strategy, How to formulate and Implement a winning plan, 2nd
Edition,2005
[Referring a Site]
[3] Unknown, Make or Buy, http://www.enotes.com/management-encyclopedia/make-

buy-decisions, Retrieved on 2nd Feb. 2011
[4] Unknown, Make or Buy, http://www.ifm.eng.cam.ac.uk/ctm/research/archive

/ind_make_buy.pdfbuy-decisions, Retrieved on 2nd Feb. 2011
[5] Unknown,Evaluation of Manufacturing Strategy http://www.scribd.com/doc/

29858082/ Evaluation-of -Manufacturing-Strategy-and-Role-of-IT, Retrieved on 25th
Jan. 2011
[6] Unknown, ERP image, http://www.erpwisdom.com/, Retrieved on 25th Jan. 2011
[7] Unknown, PLC, http://www.knowthis.com/principles-of-marketing-tutorials/planning-

with-the-product-life-cycle/Retrieved on 26th Jan. 2011
[8] Unknown, Parle G, http://www.scribd.com/doc/35300873/Final-Project-on-PARLE

Retrieved on 26th Jan. 2011
[9] Unknown, Parle G, http://www.scribd.com/doc/12412961/Parle-g-ProjectRetrieved on

26th Jan. 2011
[10] Unknown, Parle G http://www.google.co.in/imgres?imgurl=http://1.bp.blogspot.com/,

[11] Unknown, Parle G http://www.scribd.com/doc/35300873/Final-Project-on-PARLE/,

[12] Unknown, World Class Manufacturing, http://rockfordconsulting.com/world-class-

manufacturing.htm, Retrieved on 28th Jan. 2011
22
[13] Unknown, World Class Manufacturing, http://www.bpic.co.uk/faq/world_

th
class_manufacturing.htm, Retrieved on 28 Jan. 2011
[14] Unknown, World Class Manufacturinghttp://www.referenceforbusiness

.com/management/Tr-Z/World-Class-Manufacturer.html, Retrieved on 28th Jan. 2011
[15] Unknown, World Class Manufacturing,http://www.gemba.com/benchmarking-

trips.cfm?id=162Retrieved on 28th Jan. 2011
[16] Unknown, World class manufacturing Case study,

http://www.scribd.com/doc/37296626/Lucas-TVS-Case-Study , Retrieved on 28th Jan.
2011
23
BIBILIOGRAPHY
[17] Terry Hill, Manufacturing strategy, 2nd Edition, Irwin/McGraw, edn, 2000.
[18] John Miltenburg, Strategy, How to formulate and Implement a winning plan, 2nd
Edition,2005
[19] Prof.V.S.Mani, Manufacturing Strategy, Course Notes, M.S. Ramaiah School of

Advanced Studies, Bangalore, 25th Jan 2011.
24
Module Presentation
Organizational Structure
And
Leadership Style
N.Karthick/ M. Ajay Amarnath/ Arun Joseph

BUB0910013 / BUB0910014 / BUB0910015
M. Sc. (Engg.) in Engineering and Manufacturing management
Module leader:
Prof. V.G.S. Mani & Vijaya Kumar
Prof for EMM , MSRSAS, Bangalore
M. S. Ramaiah School of Advanced Studies 1
Aim and Objectives
Aim :
To know the different type of Organizational structures and
its functions and also more about the Leadership styles in
an Organization.
Objectives :
• Study and understand the different types of Organizational
structure
• Different types of Leadership styles and its effectiveness

Organizational Structures
Organizational structure is the way in which the interrelated

groups of an organization are constructed. The main concerns are
effective communication and coordination.
1. The Simple structure has authority centralized in a single
person, a flat hierarchy, few rules, and low work
specialization and is often used in the very early stages of a
firm

2. In a Functional structure, common in both profit and non-

profit organizations, people with similar occupational
specialties are put together in formal groups.
President
Vice-
Vice- Vice- Vice-
President,
President, President, President,
Human
Production Marketing Finance
Resources
Functional Structure: An Example

3. When people with diverse occupational specialties are put

together in formal groups, a Divisional structure is in place
•Product divisions group activities around similar products or

services
•Customer divisions group activities around common

customers or clients
•Geographic divisions group activities around regional

locations

Divisional Structure: Examples
Product Divisional President

Structure
Motion Magazine & Internet
Music
Pictures & TV Book Products
Division
Division Division Division
Customer
President
Divisional Structure
Consumer Mortgage Business Agriculture

Loans Loans Loans Loans
Geographic
President
Divisional Structure
Western Northern Southern Eastern

Region Region Region Region

Conglomerate Structure
4. The Conglomerate structure groups, divisions or business
units around similar businesses or industries.
President
Engineered
Fire & Plastics &
Electronics Healthcare Products
Security Adhesives
& Services
Conglomerate Structure: Typical example of the structure of

Tyco International

Hybrid Structure
5. A Hybrid structure uses functional and divisional structures in
different parts of the same organization
Product President
Divisional
Structure
President President President President
Cadillac Buick Pontiac Chevrolet
Vice-
Vice- Vice- Vice- Functional
President,
President, President, President, divisional
Human
Production Marketing Finance structure
Resources
Manager Manager Manager Manager Geographical

Region I Region II Region III Region IV divisional structure
Hybrid Structure: An Ex. of Org St of General Motors

6. When an organization combines functional and divisional

chains of command in a grid so that there a two command
structures, vertical and horizontal, a Matrix structure is used
President Functional
Structure
Project
Vice Vice Vice Vice
structure
President, President, President, President.
Project Engineering Finance Production Marketing
Manager,
Taurus
Subordinate
Project reports to
Manager,
Mustang Vice
President of
Project
marketing
Manager,
&
Explorer
Project Project
Manager, Manager for
Expedition Mustang

7. In a Team-based structure, teams, both temporary and

permanent, are used to improve horizontal relations and solve
problems throughout the organization
Functional President
Structure
V President V President V President V President

R&D Design Engineering Marketing
Project Teams
Product Team Product Team Product Team

Mfg Light Truck Mfg Sedans Mfg Sports Cars
Project Team
members

8. The Network structure or Virtual organization has a central

core that is linked to outside independent firms by computer
connections which are used to operate as if all were a single
organization
Design Components
Studio Assembly
Core Company Mexico, Asia
Sweden
USA
Engineering Distribution
Company
Company Canada
Accounting
Japan
& Finance
USA

Leadership Styles
Leadership is the art of motivating a group of people to act towards
achieving a common goal
Managers do the things right, Leaders do the right things

Leadership Styles
 Leadership style is the manner and approach of providing

direction, implementing plans, and motivating people
 Different leadership style will result in different impact to
organization
 The leader has to choose the most effective approach of
leadership style depending on situation.

Leadership Styles
Types of Leadership Styles:

 Authoritarian or Autocratic
Leadership
 Democratic or Participative
Leadership
 Delegative or Laissez-faire
Leadership

Leadership Styles
Autocratic or Authoritarian Leadership Style:
 Manager retains as much power and decision
making authority as possible
 Does not consult staff, nor allowed to give any
input
 Staff expected to obey orders without
receiving any explanations
 Greatly criticized during the past 30 years
 Rely on threats and punishment to influence
staff
Leadership Styles
The Most Effective Style to use, When:

 New, untrained staff do not know which tasks to
perform or which procedures to follow
 Effective supervision provided only through detailed orders
and instructions
 Staff do not respond to any other leadership style
 Limited time in which to make a decision
 A manager’s power challenged by staff
 Work needs to be coordinated with another department or
organization
Leadership Styles
Ineffective, When :
 Staff become tense, fearful, or resentful
 Staff expect their opinions heard
 Staff depend on their manager to make all their decisions
 Low staff morale, high turnover and absenteeism and work
stoppage

Leadership Styles
Democratic or Participative Leadership Style:
 Encourages staff to be a part of the
decision making
 Keeps staff informed about everything that affects their work and
shares decision making and problem solving responsibilities
 Group members feel engaged in the process and are more

motivated and creative
 Participative leaders encourage group members to participate, but

retain the final say over the decision-making process.

Leadership Styles
Effective ,When :
 Wants staff to share in decision-making and
problem-solving duties.
 Wants to provide opportunities for staff to develop a high
sense of personal growth and job satisfaction.
 A large or complex problem that requires lots of input and
feedbacks to solve
 Want to encourage team building and participation

Leadership Styles
Ineffective , When:
 Not enough time to get everyone’s input
 Easier and more cost-effective for the manager to make the
decision
 Can’t afford mistakes
 Manager feels threatened by this type of leadership
 Staff safety is a critical concern

Leadership Styles
Delegative or Laissez-faire Leadership

This Leadership style is a ‘hands off’ approach in
which a leader transfers decision making power to one or
more employees, but remains responsible for their decisions.

Leadership Styles
Effective , When:
 Staff highly skilled, experienced, and educated
 Staff have pride in their work and the drive to do it
successfully on their own
 Outside experts, such as staff specialists or consultants used
 Staff trustworthy and experienced

Leadership Styles
Ineffective , When:
Staff feel insecure at the unavailability of a manager
The manager cannot provide regular feedback to staff on how
well they are doing
Managers unable to thank staff for their good work
The manager doesn’t understand his or her responsibilities and
hoping the staff cover for him or her

References
[1] ] Prof V.G.S. Mani, Manufacturing Strategy, Module notes, M S Ramaiah
school of advanced studies, Bangalore , January 2010.
[2] John Miltenburg, Manufacturing Strategy: How to formulate and implement a

winning plan, 2nd Edition, Productivity Press, New York, 2005
[3] Author unknown, Organizational Structure,

http://www.fao.org/docrep/w7503e/w7503e04.htm, Retrieved on 15th January
2010.
[4] Author unknown, Organizational Structure,

http://gametlibrary.org/FILES/864_Types%20of20Organograms.pdf,Retrieved on
16th January 2010.
[5] Author unknown, Leadership Styles,

http://www.nwlink.com/donclrk/leader/leadstl.html,Retrieved on 17th January
2010.


Manufacturing Strategy: Make or Buy Decisions

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Manufacturing Strategy

POSTGRADUATE ENGINEERING AND MANAGEMENT PROGRAMME (PEMP)

Course Name: M.Sc (Engg) in EMM

Name of the Student : Arun Joseph.A

Student Registration No : BUB0910015

Module Leader at MSRSAS : Prof.V.G.S Mani

FULL TIME 200 BATCH

M. S. Ramaiah School of Advanced Studies

Course EMM Batch FT10

Module Code EMM501

Module Title Manufacturing Strategy

Module Leader Prof.V.G.S Mani

Late submission Penalties

Date Stamp from Signature of ARO

M. S. Ramaiah School of Advanced Studies

Assignment – Marks-Sheet (Assessor to Fill)

Table of Contents .................................................................................................................. ii

List of Figures ...................................................................................................................... vi

List of Table ........................................................................................................................ vii

Nomenclature ..................................................................................................................... viii

1. Introduction of Make or Buy: ......................................................................................... 1

1.1 Strategic decision: ............................................................................................... 1

1.2 Non- strategic decisions: ...................................................................................... 1

1.4 Some important considerations for a strategic reason:[1] .......................................... 2

Highly entry barriers: ..................................................................................................... 2

Secured outlets: .............................................................................................................. 2

1.5 Case study: Edge cam............................................................................................... 3

1.5.1 Make or Buy decision: ........................................................................................... 3

1.6 Conclusion: .............................................................................................................. 3

2. Manufacturing strategy: ................................................................................................. 4

2.1Need for Evaluation of manufacturing strategy:[5] .................................................... 4

2.2 Areas to be evaluate in manufacturing strategy:[2] ................................................... 5

2.2.1 Human resources: .................................................................................................. 5

2.2.2 Organizational structure and control: ..................................................................... 5

2.2.3 Design & Engineering: .......................................................................................... 5

2.2.4 Production, planning & control: ............................................................................. 5

2.2.5 Process technology: ............................................................................................... 5

2.2.6 Sourcing (vertical integration): .............................................................................. 6

2.2.7 Sales & Marketing: ................................................................................................ 6

2.3 Strategy Evaluation tools: ......................................................................................... 6

2.3.1 Experimental methods: .......................................................................................... 6

2.3.2 Thin slicing: .......................................................................................................... 6

2.3.3 Activity based costing (ABC): ............................................................................... 6

2.3.4 Balance score card (BSC): ..................................................................................... 7

2.4 Performance evaluation tools: .................................................................................. 7

2.5 Role of IT in evaluation:[5] ...................................................................................... 7

2.6 Example: Role of IT in Manufacturing (ERP): ......................................................... 8

3.0 Product Life Cycle (PLC): ........................................................................................... 9

3.1 Product selection: Parle G biscuit: ............................................................................ 9

3.1.1 Product Life Cycle of Parle G:[8] .......................................................................... 9

3.1.2 Strategies followed by Parle G: For sustain in Market ......................................... 10

SWOT analysis: ........................................................................................................... 11

Product strategy: .......................................................................................................... 11

Pricing strategy: ........................................................................................................... 11

Marketing strategy: ...................................................................................................... 12

3.2 BCG matrix of Parle G: .......................................................................................... 12

3.3 Suitable manufacturing system: Parle G ................................................................. 13

3.3.1 Equipment paced line flow production system: Parle G ....................................... 13

3.3.2 Some importance factors of Equipment paced line flow:[2] ................................. 13

4. World Class manufacturing (WCM): ........................................................................... 14

There are 3 principles behind World Class manufacturing:[13] .................................... 14

4.1 Seven steps to become world class manufacturing: ................................................. 14