Conceiving What and How many to Manufacture?

The manufacturing of a product or products is obviously to sell it in the market for business purposes. The operations function plays a very important role in the implementing strategy. It establishes the level of quality as a product is manufactured or as a service is offered. A highest  possible quality strategy dictates state of the art technology and strict  adherence to design and material requirements. A combination strategy may require lower grade technology and less concern about product design and materials specifications. If the firm decides to upgrade the quality of its product but lacks production capabilities and does not have the resources to replace its technology it becomes difficult  to reach the new standards. Operations decisions must always be consistent with corporative strategy so that the full potential of operations; resources can be harnessed in pursuit of the company’s objectives.

Operations strategy is the recognition of the important role of operations in organizational success and the involvement of operation managers in the organizations’ planning. The primary focus, then is on labour costs and operational efficiency trying  to minimize any negative impact that internal operations may have on the organization. Operations management techniques views capital investment in plant and equipment, quality control and inventory management as ways to be competitive.

Operations managers adopt new technologies on their own with a view to deliver goods and services of highest quality.  Here operations strategy  is regarded as a genuine competitive weapon. Managers try to anticipate  potential technological advances that could impact operations and to gain the necessary internal expertise well to take the organization well ahead of competition.

Product service mix

Initially every firm, should decide about the product service mix ( how many and what kinds to offer), keeping the following objectives in mind.

–Productivity: It is the degree to which a product or service can actually be manufactured for the customer within the firm’s operational capacity.

–Cost efficiency: It is the sum total of all materials, labour and overhead expenses associated with a product or service. Striving for simplicity and few parts keep product and service designs within reasonable limits. A company that stresses on cost efficiency will keep its operating costs relatively low to those other, similar companies.

–Quality: It is the excellence of the product or service – the serviceability and value  that customers gain by purchasing the products. A company that stresses on quality will consistently try to provide a level of quality that is significantly superior to that of its competitors even if it has to pay something extra to do so.

— Reliability: It is the degree to which the customer can count on the product or service to fulfill its intended function. The product should work as designed for a reasonable length of time.

–Flexibility: It is the degree to which a company can respond to changes in product design, product mix or product volume.

In actual practice, a company cannot simultaneously have a product that is lowest in cost, highest in quality and instantly available in every corner of the country. Depending on factors,  such as operational capabilities, availability of resources and technical skills, each company must earmark  and design products so as to maximize return on investments.

Currently, a growing number of companies are using design for manufacturability and assembly (DFMA) to avoid problems. The focus of DFMA is simply to make the product easy and inexpensive to the manufacturer.

Capacity Planning

Capacity planning is a process of forecasting demand and then deciding what resources will be required to meet that demand. Demand forecasting is the process of estimating  the future demand that can be expected for the organization’s various offerings under an array of different market conditions.

— The company must estimate customer reaction to the products offered by it and also take care of potential counter moves by competitors.

–Translate above estimates into capacity needs: Based  on forecasts, management must decide the amount of each offering that can be manufactured keeping input limitations such as plant, equipment, human resources etc. in mind.

–Create alternate capacity plans:  Depending on what  the market might absorb and what the organization can produce, management should come out with alternate capacity plans for various products /services that are offered to customers.

As the firm adds to the variety of its offerings (or volume), costs tend to go up. Such additional costs should be carefully evaluated in terms of expected payoffs, identifying the opportunities and threats associated with each choice.

–Select and execute a particular capacity plan: The capacity plan that best serves corporate objectives and strategies should be picked up and implemented.