Description
The report includes topics like Source of Operational Capability, Choices in Manufacturing and Engineering, Order Strategies, Coupling, Dynamics of Positioning, Incorporating Engineering into Operations Strategy.
PRODUCTION
AND OPERATIONS MANAGEMENT Vol. 5, No. I, Spring 1996 Prrnted in U.S.A.
INCLUDING
CHRISTOPHER
ENGINEERING STRATEGY
A. VOSS
AND
IN OPERATIONS *
GRAHAM M. WINCH
LondonBusiness School,London NW1 4SA, England University College, London WC2 6BT, England
Today’s markets are characterized by time and product quality-based competition. Companies must compete through their ability to manage the whole cycle of product realization and delivery, from the initial concept through to delivery and support at the customer. They must do this through managing an integrated company, not a set of separate functions. This paper addresses the issue of how companies should develop operations strategies for engineering and manufacturing combined. It uses field research into 15 engineering companies to develop the concept of the manufacturing system mission, and proposes strategic choices for manufacturing, engineering and linked functions. (MANUFACTURING STRATEGY; ENGINEERING; ALIGNMENT)
1. Introduction
Leading edge companies are increasingly competing through their ability to manage the whole cycle of product realization and delivery, from the initial concept through to delivery and support at the customer. They are doing this through managing an integrated company, not a set of separate functions. This raises a major challenge to the field of manufacturing strategy. In the early days of the study of manufacturing strategy, Skinner ( 1969) proposed that product design and engineering was one of the strategic variables of manufacturing. Unfortunately, in the intervening years, little attention has been paid to this key element. Traditionally, manufacturing strategy has been concerned solely with the decisions under the control of the manufacturing and manufacturing engineering functions. Its concern with the engineering function has usually been confined to that of the interfaces between engineering and manufacturing. (Manufacturing will be taken to include all functions within the factory including manufacturing engineering, procurement, and production planning and control, while engineering will be taken to include all functions such as design, development engineering, etc.) In this article, we first review the arguments for including engineering in operations strategy. We then draw upon field research to review three sets of operational choices involving both engineering and manufacturing-order strategies, route for development, and coupling. We then examine manufacturing and engineering strategies in terms of positioning and strategic choices. We shall explore each of these in turn before reviewing
* Received July 1995; revised February 1995 and May 1995; accepted June 1995 by Wickham Skinner. 78 1059-1478/96/0501/078$1.25
Copyright 0 1996, Production and Operations Management Society
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the overall role of engineering in operations strategy. This is a conceptual article (rather than a research-based paper) that, where appropriate, draws on research. As such, it will draw on field research in the UK as well as the research of others to explore the relationship of engineering to manufacturing strategy. In particular, we draw on field research conducted in UK metalworking firms as part of a wider study into management of engineering companies (Winch 1994).
2. The Study
The study involved field-based case research in fifteen U.K. metal manufacturing companies. The sample was selected to reflect a range of businesses and was broadly representative of the United Kingdom’s industrial base. The basic criteria for case selection were an existing CAD installation, and membership of the “metalworking” industrial sector. The importance of the latter criterion is that all firms had similar manufacturing flows all include eninformation and materials flows. The manufacturing information gineering design, and were therefore distinguished from industries such as pharmaceuticals and chemicals where R&D is much more important. The firms, their products, and sizes are listed in the Appendix. Interviews were conducted by the authors over an eighteen-month period. Interviewees included senior and middle managers in engineering and manufacturing, as well as technical staff associated with CAD and similar systems. Typical job descriptions were manufacturing director, chief engineer, and product development manager. Overall, 79 managers and engineers were interviewed. Interviews were supplemented by examination of company documents such as system descriptions. Interviews were conducted using a research instrument consisting of both open- and closed-ended questions. The data used in this article were based on the following areas: l Manufacturing strategy. Respondents were asked to identify “order winning criteria” for the major product line(s) based on Hill’s ( 1985) approach. Open-ended questions were asked concerning current and future competitive strategies. l Information flows. Flow charts for both materials and manufacturing information were developed for each company. These flows included those to and from customers. l Manufacturing and engineering processes.The type of manufacturing process, and its associated characteristics of volume and variety, were identified (Hayes and Wheelwright 1984). In addition, the presence of engineering processes such as CAD/ CAM was documented. l Mhnufacturing-engineering coupling. Questions were asked on the nature of any systems and/or organizational mechanisms for linking manufacturing and engineering. Additional questions in this section collected data on the transaction processesbetween engineering and manufacturing.
3. Background
There are now increasingly strong arguments for viewing engineering and manufacturing together as a single unit in developing an operations strategy for the whole firm. First is a market argument. Orders are not won in the marketplace from the individual efforts of the various functions; they are won through the joint efforts and capabilities of engineering and manufacturing. Second is a capability argument. The operational capability to win orders and gain competitive advantage does not come just from manufacturing, but from a broad range of sources. Finally, the manufacturing function is only part of a wider set of interlinked functions. Manufacturing firms are increasingly thinking in terms of, and competing through, their manufacturing systems, not manufacturing alone.
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Manufacturing and Engineering Jointly Win Orders World class companies around the globe, from DEC in the USA, Braun in Germany, Land Rover in the UK, and Benetton in Italy, to Toshiba in Japan, are putting product excellence and speed of new product development amongst their key competitive priorities. These are capabilities deriving from engineering and manufacturing in equal part. Hill ( 1985 ) has developed a framework for formulating manufacturing strategies built on the concept of “order-winning” and “order-qualifying” criteria. These criteria identify the priorities for manufacturing. He argues that although most relate directly to manufacture, some relate to product design and capability; these are determined by functions outside manufacturing, such as engineering. To gain insights into this, we examined the orderwinning criteria for product lines in our sample firms. Interviewees were asked to identify, for their major product line(s), those criteria that won orders in the market place. We used Hill’s list of order winners as a starting point, but respondents could propose others. Hill argues that different product lines may have different order winners, so in some cases we examined more than one product line; overall, 29 were examined. We divided the responses into two groups based on Hill’s views. The first was engineering-based criteria: those that a priori could be related to product design and capability, and could be considered as based on engineering capability. The second was manufacturing based criteria: those that are normally thought to relate to manufacturing capability. The breakdown of the responses was as follows: l Engineering-based criteria accounted for 3 1% of the sample. These included “rate of new product introduction,” “product design,” and other areas, such as technical service. l Manufacturing-based criteria accounted for the remaining 69%. The three most common order-winning criteria in our sample were price, delivery, and quality. Clearly, engineering plays an important role in winning orders. In addition, although the second set of criteria is traditionally considered to be the responsibility of manufacturing, it can be argued that it is also dependent on the performance of design and engineering. This would indicate that although some market-based priorities derive primarily from engineering, in our sample less than a third, engineering and design can make a key input alongside manufacturing in responding to most of the others. In many cases, engineering and manufacturing jointly win orders. Broad Source of Operational Capability One reason that manufacturing and engineering win orders together is that the source of operational capability is spread across functions. For example, the capabilities for low cost manufacturing traditionally have been seen as being embedded in manufacturing, deriving from areas such as the use of appropriate manufacturing processes; workforce involvement leading to higher productivity; purchasing skills reducing the cost of components; use of ‘lean’ manufacturing practices; and the use of TOM approaches. However, engineering will also play a major role in cost performance. Design for manufacture can be a prerequisite of low cost manufacture, as can design for quality. The technology and componentry used can also provide a major leverage on cost. Indeed, in many cases, a significant proportion of a product’s cost is determined in the design stage. It can be argued that in an increasing number of markets, the market leader is the company that moves fastest; to survive in some markets, exceptional levels of change are required. For example, in the Japanese market, at the start of 1992, the average life cycle for models was 9- 10 months for VCRs, 11 months for vacuum cleaners, 18 months for washing machines, and 12- 13 months for televisions (Yamashina 1995 ) . This is not confined to Japan. In the United States, the resurgence of US automakers in 1993 has been attributed to the speed with which they have moved into the new markets for offroad vehicles and vans, leaving Japanese companies trailing. Stalk and Hout ( 1990)
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argue that the operational capabilities needed for time-based competition are embedded in a number of functions, including not just manufacturing, but also product design and development, as well as distribution. The capabilities for time-based competition in engineering include those often known as concurrent engineering. They include areas such as rapid prototyping and the ability to involve a wide range of people at an early stage in the design process. These are two examples of how a particular capability in manufacturing companies derives from capabilities in both manufacturing and engineering. These capabilities derive from not just the individual functions, but also from a joint contribution-managing the engineering and manufacturing interface. Examples of the sources of these capabilities for each of the main areas in manufacturing are given in Table 1. Competing through the Manufacturing System Manufacturing can be considered not just in terms of its components, but as a system: “The complete system of lean production extend(s) from product planning through all the steps of manufacture and supply system coordination on to the customer” ( Womack et al. 1990). The role of manufacturing systems in supporting competitiveness has been examined by authors such as Berry and Hill ( 1992), who reviewed the links between manufacturing systems and strategy.
4. Choices in Manufacturing and Engineering
One perspective on manufacturing strategy is that of strategic choice (Voss 1995). The pursuit of integrated manufacture and engineering has led companies to focus on
TABLE
Examples o$Source of Capabilities
I
and Engineering
in Manufacturing
Capability
Manufacturing Contribution Low-cost manufacture through manufacturing technology, lean production, productivity, workforce management, etc.
Engineering Contribution Low-cost products through design for manufacture, component design, use of new product technology, etc. Low development costs through efficient product development processes. Effective product development process (concurrent engineering), rapid prototyping. Modular design for customization, rapid response to market feedback. Technological and design skills. Capability to access ‘voice of the customer.’ Design for quality, quality function deployment.
Joint Contribution Manufacturing involvement in design teams.
Fast time to market
Capability for fast ramp-up of new products, right first time production.
Early involvement of all functions, right first time design. Effective crossfunctional team work. Rapid feedback to engineering. Joint product and process development. TQM programs.
Responsiveness Mass customization.
Product capability Product quality
Leading edge manufacturing capability. Manufacturing process capability, human resource management, quality planning.
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the engineering-manufacturing interface, and this in turn has led to the realization that the information flows and the coupling are crucial in developing the integrated manufacturing firm. We examined three areas of potential choice (order strategies, development routes, and coupling) through examination of flows of orders and information on products and orders across both engineering and manufacture. Order Strategies Manufacturing can consider the relationship with its customer in terms of the flow of orders; traditionally, this is looked at in terms of “make to order” and “make to forecast.” However, in many companies, the order goes first to engineering. For example, most defense orders start with a concept sent to engineering, not an order sent to manufacturing. We therefore decided to review the data from the cases in order to develop a classification scheme that was more sensitive to the actual strategies of the case companies. We did this through examining where the customer enters the manufacturing information flow. The manufacturing information flow is the complete flow of information necessary for the manufacture of a good from conception to delivery. The generic flow has four main stages: design, detailing, planning, and control (Winch 1983). It was found that in addition to the traditional manufacturing-led patterns, there were distinctive engineering/designled patterns (see Appendix).
ORDERSPLACEDONMANUFACTURING
l
l
Make to forecast. Where a company sells direct to the final customer through a distribution network, manufacturing is on a make to forecast basis. Three of the companies-the two vehicle companies and one of the mechanical engineering companies-followed this pattern. Make to order. Where the order takes the form of a contract against the customers’ forward schedule (for example, manufacturers of components for other final assemblers), companies tended to build on a make to order basis. Customization. In make to order, each order may include an element of customization of the standard product through “variant design.” Some capital goods companies built or assembled to specific orders which took the form of individual contracts, for which a greater amount of customization, or “contract design” may be done. Customization can also be done on a high volume basis, mass customization. Although it was not found in our sample, it has been observed by researchers in other companies (Westbrook and Williamson 1993 ) .
ENGINEERING/DESIGN
ORDERSPLACEDONMANUFACTURINGSYSTEM
l
ORDERS PLACEDON
l
Design to order. For example, one group of companies tendered on a basic design, then undertook significant development to meet the needs of the particular customer. In such cases, the contract was placed towards the end of the design stage. It is the limitation of customer-specific engineering design work to customization that distinguished the make to order companies from these design to order companies. l Concept to order. This is typical of defense companies, where the customer in the form of the responsible procurement agency was heavily involved in developing the design concept, usually on a separate contract from the contract to build. The contract with the customer is made virtually at the start of the manufacturing information flow. We thus have three groups of order patterns: one manufacturing dominated, comprising make to forecast and make to order against forward schedule; one design dominated, comprising design to order and concept to order; and one hybrid, customization. Each represents a different choice of relationships with the customer and a different set of information flows within the manufacturing system.
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Routes for Development We also found that there were different routes for the development of new or modified products, with three distinctive patterns being identified (see Appendix): l Tender route. The business puts considerable engineering effort into tendering to the customer for each contract. This accounted for six of the cases. l Procurement route. The two companies displaying this flow were the two defense companies. The distinctive feature of this route is the separation of the “design order” from the “build order,” and the absence of a distinctive tendering process. This route would seem to represent that associated with “co-makership,” where the customer works in partnership with its suppliers in developing new products. l Development route. This is where the company develops a product, or at least a generic product type, before seeking specific contracts or selling. The product development process may involve considerable consultation with potential customers, and individual contracts can involve customizing the generic product. Coupling-The Engineering Manufacturing Interface With the increasing development of organization mechanisms and systems linking engineering and manufacturing, a key choice for companies is the degree to which they choose to link or couple engineering and manufacturing. Increasingly, the successful firms in many market sectors are introducing close coupling between engineering and manufacturing. The automotive industry is a prime example, where the leading companies are driving down product life cycles and increasing the quality of design for manufacture through close coupling using a wide range of mechanisms. Whether close coupling is required in every sector in an unanswered question. It is difficult to determine the degree to which coupling, in operations strategy terms, is a positioning choice, or if strong coupling should be seen as general good practice. Our empirical evidence indicated that strong coupling between engineering and manufacturing is important when the market-based priorities include fast product development times, but that customization and contract design may be handled with loose coupling. The companies in our sample pursuing strong DRIVERS FOR STRONG COUPLING. coupling were similar in having relatively frequent new product initiatives. All were driven to improve the product introduction process. For example, in the vehicle companies, the aim was to reduce product development lead times, and one claimed to have reduced the time for its latest project to the then-industry average of four years, with one brand new vehicle developed in less than three years. In a vehicle components company, a history of failed product development initiatives had stimulated a move towards stronger coupling. In another, the aim of reducing costs by 30% over 18 months had given the mandate for a significant change in product development methods. A particular target for this company was the reduction of the number of very expensive and slow engineering change orders (ECO) by getting manufacturing input to each design before it was signed off and hence develop more reliable EC0 procedures. For another company that already had strong coupling, its business strategy of being a follower in developments in product technology meant that product development lead times needed to be very quick to respond to competitors’ initiatives-over the last 12 years they have reduced product development times from 18 months to 6 months. From Choice to Strategy The manufacturing strategy literature views choices in terms of structure and infrastructure (Hill 1985 ) and the positioning on the product-process matrix (Hayes and Wheelwright 1984). The three sets of choices outlined above can be reviewed in terms of these two frameworks as strategic choices and positioning.
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5. Positioning
in Engineering
and Manufacturing
In reviewing the data from the 15 companies studied, we found that there were a variety of information flows associated with different order patterns, product routes, volumes, and processes. These can be viewed on two dimensions: first, customer specificity (the degree to which products are engineered for specific customers), and second, product volume. This is derived from Hayes and Wheelwright ( 1984), however, we have chosen to modify the vertical axis. Rather than use variety, which is not specific enough to capture the differences in engineering input required in different contexts, we chose to use customer specificity. We propose four types of positioning; illustrated in Figure 1: l Design for customer. This positioning was found in companies who were design or concept to order, typically through a customer tender or procurement route, and had flexible process technology, information flow, and a low volume. These were characterized by the defense companies in our sample. l Response. These companies are typically seeking to respond rapidly to markets and customers. They have a development route for product development and pursue manufacturing polices leading to responsive manufacturing. The companies in this category in our sample focused on low volume batch manufacturing. The two case companies in this category were mechanical engineering companies which successfully competed in global markets. The history of.both these companies suggests that they may represent an emergent type of positioning which can be described as response led positioning. These companies are focusing on rapid development of new products using “lean production.” l Muss customization. At higher volume levels, we find the mass customizers, who have built an additional set of capabilities that enables them to rapidly configure or customize for their customers. Again, we see this as an emergent type of generic positioning (Pine et al. 1993). l Muss production. This is the traditional low cost manufacturing and is characterized by a make to order or forecast, relatively dedicated batch or line process technologies, a development route product development pattern, and high unit volume. Dynamics of Positioning We can view dynamics in a similar manner to that proposed by Hayes and Wheelwright ( 1984). The diagonal on Figure 2 represents the traditional viable positioning of com-
*
FIGURE I. Positioning.
Vohme
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clustomer ’
Specificity
Posidon of compaldes AandD
Volume
FIGURE 2. Changes in Positioning.
panies. Below the diagonal, the capability to provide engineering value added for customers requiring highly specific designs may not be sufficient; in addition, the manufacturing process may be inappropriate. Above the diagonal there are likely to be severe cost penalties unless mass customization technologies are used. We can illustrate this with two of the case studies from our research (companies A and D), who were both located below the diagonal position. Both had recognized the problems associated with this position in that both were serving markets that were medium volume, potentially high customer specificity, with medium volume batch manufacture but without the engineering capability to respond to customer needs. Both were only just starting to develop a capability for rapid product development to increase the value added within their operations. Figure 2 indicates that there should be three possible moves for these companies: to move to design-led positioning, to move to response positioning, or to develop the capability of mass customization. Company A’s strategy was to move towards a strong design capability and to restructure its manufacturing capability for low volumes and higher responsiveness in “engineered” products. Company D planned to move more towards a rapid response and high quality development route as it shifted to “black box” design for its customers. Neither had chosen to move to mass customization. In both cases, the implementation of CAD/CAM systems was seen as central to these shifts in positioning.
6. Incorporating Engineering into Operations Strategy
We have argued that to meet customer needs in the market place, we need an operating strategy that brings engineering and manufacturing strategy together. From the above evidence and discussion, we can develop two sets of propositions. From a Manufacturing Mission to a Manufacturing System Mission
We propose that no longer can a company think of itself in terms of functions; it must think of itself in terms of a manufacturing system. The development of mission statements is widespread in manufacturing companies, supported by many approaches such as the order-winning criteria described earlier. In considering how companies can respond strategically to the operating performance requirements required by the market, we must
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look to both manufacturing and engineering. In addition, we must not just look to the capabilities of individual functions to support the mission; the ability to achieve these goals depends also on the ability of manufacturing and engineering to link together as a single system. Traditionally, companies have taken market-based priorities and translated them into a manufacturing mission. A manufacturing mission or task is “one or two of the (performance) objectives and is derived from the firm’s competitive strategy, economics and technological opportunities” (Skinner 1992). We propose that this must be a manufacturing system mission; that is, what has to be achieved by the total manufacturing system in order to satisfy customers. The manufacturing system mission can then be translated into required capabilities for manufacturing, engineering, and the combined manufacturing and engineering system. This is illustrated in Figure 3. Such a translation requires an appropriate process of strategy development. A study of this found that in many firms, the manufacturing strategy development process was relatively new (Maruchek, Pannesi and Anderson 1992 ) . Most firms had started by developing a manufacturing mission which was ‘a statement of how to be successful in the business and how manufacturing could best support the business.’ This then led to the development of manufacturing objectives. We foresee a parallel, but expanded, process if engineering is to be included. They key process elements would be first, to include*engineering and technology development managers in the mission development process, and second, to expand the scope of the mission statement and objectives. The latter is described in more detail later. Making Strategic Choices in Manufacturing and Engineering
Strategic choices have been well studied in the manufacturing literature (Hayes and Wheelwright 1984; Hill 1985). They have usually been stated in terms of choice in process and infrastructure. These choices need to be both consistent with each other (internal consistency), and with the company’s strategy (external consistency). In contrast, a review of the literature indicates that little has been published on the strategic choices
DEVELOPING A COMBINED MISSION
+ MANUFACTURINQ SYSTEM MISSION
ftoaponoo through MANUMCtURlNQ CAMBILITY
FIGURE
Rorponro through LINKED CAMBILITY
3. Developing a Combined Mission.
Rorponoo through ENQINEERINQ CAMBILITY
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both within engineering and to achieve linked capability between engineering and manufacturing. In a study of the links between engineering and manufacturing, Coughlan and Voss ( 1992) describe these strategic choices in terms of process, people, and tools. Process includes the processes of concurrent engineering, fast ramp-up of new products, and the use of prototyping. People encompasses the organization, teamwork, integration mechanisms, etc. required to effectively link manufacturing and engineering. Tools includes those tools that support cross-functional involvement such as Quality Function Deployment and Process FMEA and systems such as CAD/CAM, rapid prototyping, ComputerAided Logistics Systems (CALS), and quality systems involving manufacturing and engineering. Within engineering, there are a similar set of strategic choices in people, process, and tools: ( 1) process-including project selection and evaluation, creativity development, technology acquisition, make versus buy policies, and choice of technologies; (2) peopleincluding the organization of project teams, the management of the dual ladder, links with technology suppliers; and (3) tools-including simulation, design of experiments, Computer Aided Engineering ( CAE), and finite element analysis. These strategic choices fall naturally into three categories: choices in manufacturing, choices in engineering, and linked choices. The latter are particularly important, as they require effective organizational links between functions at the policy development stage. A selection of potential choices is shown in Table 2. This set of choices presents a number of challenges for management. A company must have a process of strategy development that effectively brings together participants from different functions to ensure effective communication and collaboration in strategy setting. In the competitive world of the 1990s and beyond, functionally based strategy setting will not suffice. Unfortunately, our field research found few firms that had effective crossfunctional strategic processes. The second challenge is to ensure internal consistency. This has proved difficult for most firms within the manufacturing function, linked strategies will present an additional level of complexity from which simplicity and focus must be developed.
TABLE
2
Strategic Choices: The Content of Manufacturing and Engineering Strategies
Manufacturing
PrOCess
Choices
Linked Choices Process Concurrent engineering Level 0 prototyping, fast product ramp-up Performance measurement Order strategies Route for development People Coupling Cross-functional team work, co-location, organizational integration mechanisms Tools QFD, CALS, CAD/CAM, rapid prototyping Design for manufacture Design for cost
Engineering Choices Process Project selection and evaluation, creativity, product planning, technology planning and acquisition, licensing in and out, technology choice Develop versus buy Technological forecasting People Team organization, links with suppliers, customers, promoting early involvement Tools Simulation, design of experiments (Taguchi), computer-aided engineering, finite element analysis
Choice of process Facilities location and size Make versus buy Vertical integration
Infrastructurt! Quality management Manufacturing planning and control systems Manufacturing technology Work organization Supplier relations Manufacturing systems Information systems Lean production Control
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The final challenge is to develop a coherent set of strategic choices in all of these areas so that real competitive advantage is gained from the full manufacturing system. At one level, they must reflect best in class practice in the key areas chosen. Together, it is likely that the focused factory must evolve into the focused manufacturing company, one where the processes, infrastructure, systems, and tools in all areas are aligned around a limited set of market-based tasks.
7. Summary Implications for Research
As stated earlier, research in manufacturing strategy has been based on a narrow focus on the process and infrastructure of manufacturing. There are a number of implications from research arising from this article. First, we propose a broader scope for manufacturing strategy. For example, in Table 2, a set of engineering and linked strategic choices are proposed. This is a partial list; there is a need for field research to identify in greater detail the strategic choices facing engineering and manufacturing. The rapid development of new technologies, both within engineering and to link engineering, manufacturing, suppliers and customers, and the development of more sophisticated organizational forms, such as the virtual factory, all lead to the need to understand more fully this area. Development of understanding in this area may come from detailed, case-based empirical research. A second research need is related to these strategic choices. What are the factors that influence these choices? Are firm size, industry, market and/or manufacturing process important in making choices. These are questions that are important to both integrating engineering into the theory of manufacturing strategy, and in helping firms operationalize the findings. Another potential research focus is to study the impact of engineering and manufacturing strategies on performance. If the propositions put forward in this paper hold, then firms with internal consistency between manufacturing and engineering choices, and external consistency between engineering, manufacturing, and the market place will have superior performance. This proposition needs to be tested through large-scale empirical research. Finally, an important question is how this may be made to happen. There is a need to extend research into the process of manufacturing strategy formulation. In particular, the issues concerned with involvement of a wider range of functions need to be examined. Learning perspectives (Leonard-Barton 1992) may assist in research into implementation of cross-functional manufacturing system strategies.
TABLE
From Traditional to Linked
3
in Manufacturing
Strategies
Traditional Manufacturing Strategy Focus on the single function Gain competitive advantage through manufacturing Develop a manufacturing mission Functional strategic choices A functional approach for strategy development
Linked Strategies Focus on the total product realization process and the supply chain Gain competitive advantage through manufacturing system capability Develop a manufacturing systems mission highlighting the response from engineering, manufacturing, and linked capability Focus on joint strategic choices and functional choices A cross-functional, team approach for strategy development
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Conclusions
As put forward at the start of this article, the arguments for viewing manufacturing and engineering together as a single unit in developing an operations strategy are too strong to ignore. We have used empirical research to explore this and identify some of the content of an expanded scope of manufacturing strategies. We have argued that the operations strategy must move from the traditional functional focus to a new approach, as shown in Table 3. We have proposed that companies must move towards a manufacturing systems mission, and need to take a broader view of strategic choices, embracing engineering and combined engineering and manufacturing choices, as well as the well-established manufacturing choices. Some potential choices have been outlined using a process, people, and tools structure. Finally, we have argued that the challenge for companies is to develop strategies that ensure internal consistency and that comprise a coherent set of choices, moving from the focused factory towards the focused manufacturing company. This broader view of manufacturing strategy raises many questions for further research, some of which have been outlined. Companies who fail to take these lessons on board risk being left behind in the competitive race against companies who are exploiting all of their capabilities and the links between them.’
’ The authors gratefully acknowledge the support of the Science and Engineering Research Council, the ESRC/SERC joint committee who funded this research, and the valuable comments of Professor Wickham Skinner and two anonymous reviewers. APPENDIX
Research Data
Company A B C D E F G H I J K L M N 0
Product Building components Mechanical engineering Electrical engineering Hydraulic components Aerospace Vehicle components Shipbuilding Heavy engineering Heavy engineering Vehicles Aerospace components Vehicles Vehicle components Mechanical engineering Vehicle components
Parent Origin UK Independent UK UK UK EEC UK UK UK Independent UK UK UK us UK
Unit Size 500 914 1,230 176 4,500 800 12,000 1,210 2,200 12,000 1,400 38,000 2,500 1,100 4,000
Order Pattern MtF MtF DtO MtO/F cto MtO/F cto DtO DtO MtF DtO MtF MtO/F MtO/C MtO
Development Route Tender Development Tender Tender Procurement Development Procurement Tender Tender Development Tender Development Development Development Development
Volume/ Process High/batch Low/batch Low/one-off High/batch Low/one-off High/batch Low/one-off Low/one-off Low/one-off High/line Low/batch High/line High/line Low/batch High/batch
MtF: Make to Forecast; DtO: Design to Order; MtO/F: Make to Order/Forecasts; CtO: Concept to Order; MtO/C: Make to Order/Concept to Order.
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COUGHLAN, P. D. AND C. A. VOSS ( 1992), Review of Practice and Issues in Simultaneous Engineering, Report to the UK Science and Engineering Research Council, London Business School. HAYES, R. AND S. WHEELWRIGHT ( 1984), Restoring Our Competitive Edge, Wiley, New York. Strategy, Macmillan, Basingstoke, UK. HILL, T. ( 1985), Manufacturing LEONARD-BARTON, D. ( 1992), “The Factory as a Learning Laboratory,” Sloan Management Review, 34, 1, 23-38. MARUCHEK, A., R. PANNESI,AND C. ANDERSON( 1992), “An Exploratory Study ofthe Manufacturing Strategy in Process,” in C. A. Voss (ed.), Manufacturing Strategy, Process and Content, Chapman and Hall, London, 89- 120. PINE, B. J., B. VICTOR, AND A. C. BOYNTON ( 1993), “Making Mass Customization Work,” Harvard Business Review, Sept-Ott, 108- 119. PRAHALAD, C. K. AND G. HAMEL ( 1990), “The Core Competence of the Corporation,” Harvard Business Review, 68, 3, 19-9 1. SKINNER, W. ( 1969), “Manufacturing-Missing Link in Corporate Strategy,” Harvard Business Review, MayJune, 136-145. SKINNER, W. ( 1992), “Missing the Links in Manufacturing Strategy,” in C. A. Voss (ed.), Manufacturing Strategy, Process and Content, Chapman and Hall, London, 13-25. STALK, G., JR. AND T. M. HOUT ( 1990), Competing Against Time, Free Press, New York. STALK, G., JR. P. EVANS, AND P. E. SCHULMAN (1992), “Competing on Capabilities: The New Rules of Corporate Strategy,” Harvard Business Review, March-April, 57-69. Journal of Operations VOSS, C. A. ( 1995), “Alternative Paradigms for Manufacturing Strategy,” International and Production Management, 15, 4, 5- 16. WESTBROOK, R. AND P. WILLIAMSON ( 1993), “Mass Customization, Japan’s New Frontier,” European Management Review, 11, 1, 38-45. Technology WINCH, G. M. ( 1983), “Organization Design for CAD/CAM,” in G. M. Winch (ed.), Infirmation in Manufacturing Processes, Rosendale, London. WINCH, G. M. ( 1991), Organization Design for Metalworking Production, Working Paper, Bartlett School of Architecture, University College London. WINCH, G. M. ( 1994), Managing Production, Engineering Change and Stability, Oxford University Press, Oxford. WOMACK, J. P., D. T. JONES,AND D. Roos ( 1990), “The Machine That Changed The World,” Macmillan, Basingstoke, UK. YAMASHINA, H. ( 1995), “Japanese Manufacturing Strategy to Compete with Tigers,” in Tomorrow’s Best Practice, Foundation for Manufacturing Industry, London.
doc_611942654.pdf
The report includes topics like Source of Operational Capability, Choices in Manufacturing and Engineering, Order Strategies, Coupling, Dynamics of Positioning, Incorporating Engineering into Operations Strategy.
PRODUCTION
AND OPERATIONS MANAGEMENT Vol. 5, No. I, Spring 1996 Prrnted in U.S.A.
INCLUDING
CHRISTOPHER
ENGINEERING STRATEGY
A. VOSS
AND
IN OPERATIONS *
GRAHAM M. WINCH
LondonBusiness School,London NW1 4SA, England University College, London WC2 6BT, England
Today’s markets are characterized by time and product quality-based competition. Companies must compete through their ability to manage the whole cycle of product realization and delivery, from the initial concept through to delivery and support at the customer. They must do this through managing an integrated company, not a set of separate functions. This paper addresses the issue of how companies should develop operations strategies for engineering and manufacturing combined. It uses field research into 15 engineering companies to develop the concept of the manufacturing system mission, and proposes strategic choices for manufacturing, engineering and linked functions. (MANUFACTURING STRATEGY; ENGINEERING; ALIGNMENT)
1. Introduction
Leading edge companies are increasingly competing through their ability to manage the whole cycle of product realization and delivery, from the initial concept through to delivery and support at the customer. They are doing this through managing an integrated company, not a set of separate functions. This raises a major challenge to the field of manufacturing strategy. In the early days of the study of manufacturing strategy, Skinner ( 1969) proposed that product design and engineering was one of the strategic variables of manufacturing. Unfortunately, in the intervening years, little attention has been paid to this key element. Traditionally, manufacturing strategy has been concerned solely with the decisions under the control of the manufacturing and manufacturing engineering functions. Its concern with the engineering function has usually been confined to that of the interfaces between engineering and manufacturing. (Manufacturing will be taken to include all functions within the factory including manufacturing engineering, procurement, and production planning and control, while engineering will be taken to include all functions such as design, development engineering, etc.) In this article, we first review the arguments for including engineering in operations strategy. We then draw upon field research to review three sets of operational choices involving both engineering and manufacturing-order strategies, route for development, and coupling. We then examine manufacturing and engineering strategies in terms of positioning and strategic choices. We shall explore each of these in turn before reviewing
* Received July 1995; revised February 1995 and May 1995; accepted June 1995 by Wickham Skinner. 78 1059-1478/96/0501/078$1.25
Copyright 0 1996, Production and Operations Management Society
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the overall role of engineering in operations strategy. This is a conceptual article (rather than a research-based paper) that, where appropriate, draws on research. As such, it will draw on field research in the UK as well as the research of others to explore the relationship of engineering to manufacturing strategy. In particular, we draw on field research conducted in UK metalworking firms as part of a wider study into management of engineering companies (Winch 1994).
2. The Study
The study involved field-based case research in fifteen U.K. metal manufacturing companies. The sample was selected to reflect a range of businesses and was broadly representative of the United Kingdom’s industrial base. The basic criteria for case selection were an existing CAD installation, and membership of the “metalworking” industrial sector. The importance of the latter criterion is that all firms had similar manufacturing flows all include eninformation and materials flows. The manufacturing information gineering design, and were therefore distinguished from industries such as pharmaceuticals and chemicals where R&D is much more important. The firms, their products, and sizes are listed in the Appendix. Interviews were conducted by the authors over an eighteen-month period. Interviewees included senior and middle managers in engineering and manufacturing, as well as technical staff associated with CAD and similar systems. Typical job descriptions were manufacturing director, chief engineer, and product development manager. Overall, 79 managers and engineers were interviewed. Interviews were supplemented by examination of company documents such as system descriptions. Interviews were conducted using a research instrument consisting of both open- and closed-ended questions. The data used in this article were based on the following areas: l Manufacturing strategy. Respondents were asked to identify “order winning criteria” for the major product line(s) based on Hill’s ( 1985) approach. Open-ended questions were asked concerning current and future competitive strategies. l Information flows. Flow charts for both materials and manufacturing information were developed for each company. These flows included those to and from customers. l Manufacturing and engineering processes.The type of manufacturing process, and its associated characteristics of volume and variety, were identified (Hayes and Wheelwright 1984). In addition, the presence of engineering processes such as CAD/ CAM was documented. l Mhnufacturing-engineering coupling. Questions were asked on the nature of any systems and/or organizational mechanisms for linking manufacturing and engineering. Additional questions in this section collected data on the transaction processesbetween engineering and manufacturing.
3. Background
There are now increasingly strong arguments for viewing engineering and manufacturing together as a single unit in developing an operations strategy for the whole firm. First is a market argument. Orders are not won in the marketplace from the individual efforts of the various functions; they are won through the joint efforts and capabilities of engineering and manufacturing. Second is a capability argument. The operational capability to win orders and gain competitive advantage does not come just from manufacturing, but from a broad range of sources. Finally, the manufacturing function is only part of a wider set of interlinked functions. Manufacturing firms are increasingly thinking in terms of, and competing through, their manufacturing systems, not manufacturing alone.
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Manufacturing and Engineering Jointly Win Orders World class companies around the globe, from DEC in the USA, Braun in Germany, Land Rover in the UK, and Benetton in Italy, to Toshiba in Japan, are putting product excellence and speed of new product development amongst their key competitive priorities. These are capabilities deriving from engineering and manufacturing in equal part. Hill ( 1985 ) has developed a framework for formulating manufacturing strategies built on the concept of “order-winning” and “order-qualifying” criteria. These criteria identify the priorities for manufacturing. He argues that although most relate directly to manufacture, some relate to product design and capability; these are determined by functions outside manufacturing, such as engineering. To gain insights into this, we examined the orderwinning criteria for product lines in our sample firms. Interviewees were asked to identify, for their major product line(s), those criteria that won orders in the market place. We used Hill’s list of order winners as a starting point, but respondents could propose others. Hill argues that different product lines may have different order winners, so in some cases we examined more than one product line; overall, 29 were examined. We divided the responses into two groups based on Hill’s views. The first was engineering-based criteria: those that a priori could be related to product design and capability, and could be considered as based on engineering capability. The second was manufacturing based criteria: those that are normally thought to relate to manufacturing capability. The breakdown of the responses was as follows: l Engineering-based criteria accounted for 3 1% of the sample. These included “rate of new product introduction,” “product design,” and other areas, such as technical service. l Manufacturing-based criteria accounted for the remaining 69%. The three most common order-winning criteria in our sample were price, delivery, and quality. Clearly, engineering plays an important role in winning orders. In addition, although the second set of criteria is traditionally considered to be the responsibility of manufacturing, it can be argued that it is also dependent on the performance of design and engineering. This would indicate that although some market-based priorities derive primarily from engineering, in our sample less than a third, engineering and design can make a key input alongside manufacturing in responding to most of the others. In many cases, engineering and manufacturing jointly win orders. Broad Source of Operational Capability One reason that manufacturing and engineering win orders together is that the source of operational capability is spread across functions. For example, the capabilities for low cost manufacturing traditionally have been seen as being embedded in manufacturing, deriving from areas such as the use of appropriate manufacturing processes; workforce involvement leading to higher productivity; purchasing skills reducing the cost of components; use of ‘lean’ manufacturing practices; and the use of TOM approaches. However, engineering will also play a major role in cost performance. Design for manufacture can be a prerequisite of low cost manufacture, as can design for quality. The technology and componentry used can also provide a major leverage on cost. Indeed, in many cases, a significant proportion of a product’s cost is determined in the design stage. It can be argued that in an increasing number of markets, the market leader is the company that moves fastest; to survive in some markets, exceptional levels of change are required. For example, in the Japanese market, at the start of 1992, the average life cycle for models was 9- 10 months for VCRs, 11 months for vacuum cleaners, 18 months for washing machines, and 12- 13 months for televisions (Yamashina 1995 ) . This is not confined to Japan. In the United States, the resurgence of US automakers in 1993 has been attributed to the speed with which they have moved into the new markets for offroad vehicles and vans, leaving Japanese companies trailing. Stalk and Hout ( 1990)
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argue that the operational capabilities needed for time-based competition are embedded in a number of functions, including not just manufacturing, but also product design and development, as well as distribution. The capabilities for time-based competition in engineering include those often known as concurrent engineering. They include areas such as rapid prototyping and the ability to involve a wide range of people at an early stage in the design process. These are two examples of how a particular capability in manufacturing companies derives from capabilities in both manufacturing and engineering. These capabilities derive from not just the individual functions, but also from a joint contribution-managing the engineering and manufacturing interface. Examples of the sources of these capabilities for each of the main areas in manufacturing are given in Table 1. Competing through the Manufacturing System Manufacturing can be considered not just in terms of its components, but as a system: “The complete system of lean production extend(s) from product planning through all the steps of manufacture and supply system coordination on to the customer” ( Womack et al. 1990). The role of manufacturing systems in supporting competitiveness has been examined by authors such as Berry and Hill ( 1992), who reviewed the links between manufacturing systems and strategy.
4. Choices in Manufacturing and Engineering
One perspective on manufacturing strategy is that of strategic choice (Voss 1995). The pursuit of integrated manufacture and engineering has led companies to focus on
TABLE
Examples o$Source of Capabilities
I
and Engineering
in Manufacturing
Capability
Manufacturing Contribution Low-cost manufacture through manufacturing technology, lean production, productivity, workforce management, etc.
Engineering Contribution Low-cost products through design for manufacture, component design, use of new product technology, etc. Low development costs through efficient product development processes. Effective product development process (concurrent engineering), rapid prototyping. Modular design for customization, rapid response to market feedback. Technological and design skills. Capability to access ‘voice of the customer.’ Design for quality, quality function deployment.
Joint Contribution Manufacturing involvement in design teams.
Fast time to market
Capability for fast ramp-up of new products, right first time production.
Early involvement of all functions, right first time design. Effective crossfunctional team work. Rapid feedback to engineering. Joint product and process development. TQM programs.
Responsiveness Mass customization.
Product capability Product quality
Leading edge manufacturing capability. Manufacturing process capability, human resource management, quality planning.
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the engineering-manufacturing interface, and this in turn has led to the realization that the information flows and the coupling are crucial in developing the integrated manufacturing firm. We examined three areas of potential choice (order strategies, development routes, and coupling) through examination of flows of orders and information on products and orders across both engineering and manufacture. Order Strategies Manufacturing can consider the relationship with its customer in terms of the flow of orders; traditionally, this is looked at in terms of “make to order” and “make to forecast.” However, in many companies, the order goes first to engineering. For example, most defense orders start with a concept sent to engineering, not an order sent to manufacturing. We therefore decided to review the data from the cases in order to develop a classification scheme that was more sensitive to the actual strategies of the case companies. We did this through examining where the customer enters the manufacturing information flow. The manufacturing information flow is the complete flow of information necessary for the manufacture of a good from conception to delivery. The generic flow has four main stages: design, detailing, planning, and control (Winch 1983). It was found that in addition to the traditional manufacturing-led patterns, there were distinctive engineering/designled patterns (see Appendix).
ORDERSPLACEDONMANUFACTURING
l
l
Make to forecast. Where a company sells direct to the final customer through a distribution network, manufacturing is on a make to forecast basis. Three of the companies-the two vehicle companies and one of the mechanical engineering companies-followed this pattern. Make to order. Where the order takes the form of a contract against the customers’ forward schedule (for example, manufacturers of components for other final assemblers), companies tended to build on a make to order basis. Customization. In make to order, each order may include an element of customization of the standard product through “variant design.” Some capital goods companies built or assembled to specific orders which took the form of individual contracts, for which a greater amount of customization, or “contract design” may be done. Customization can also be done on a high volume basis, mass customization. Although it was not found in our sample, it has been observed by researchers in other companies (Westbrook and Williamson 1993 ) .
ENGINEERING/DESIGN
ORDERSPLACEDONMANUFACTURINGSYSTEM
l
ORDERS PLACEDON
l
Design to order. For example, one group of companies tendered on a basic design, then undertook significant development to meet the needs of the particular customer. In such cases, the contract was placed towards the end of the design stage. It is the limitation of customer-specific engineering design work to customization that distinguished the make to order companies from these design to order companies. l Concept to order. This is typical of defense companies, where the customer in the form of the responsible procurement agency was heavily involved in developing the design concept, usually on a separate contract from the contract to build. The contract with the customer is made virtually at the start of the manufacturing information flow. We thus have three groups of order patterns: one manufacturing dominated, comprising make to forecast and make to order against forward schedule; one design dominated, comprising design to order and concept to order; and one hybrid, customization. Each represents a different choice of relationships with the customer and a different set of information flows within the manufacturing system.
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Routes for Development We also found that there were different routes for the development of new or modified products, with three distinctive patterns being identified (see Appendix): l Tender route. The business puts considerable engineering effort into tendering to the customer for each contract. This accounted for six of the cases. l Procurement route. The two companies displaying this flow were the two defense companies. The distinctive feature of this route is the separation of the “design order” from the “build order,” and the absence of a distinctive tendering process. This route would seem to represent that associated with “co-makership,” where the customer works in partnership with its suppliers in developing new products. l Development route. This is where the company develops a product, or at least a generic product type, before seeking specific contracts or selling. The product development process may involve considerable consultation with potential customers, and individual contracts can involve customizing the generic product. Coupling-The Engineering Manufacturing Interface With the increasing development of organization mechanisms and systems linking engineering and manufacturing, a key choice for companies is the degree to which they choose to link or couple engineering and manufacturing. Increasingly, the successful firms in many market sectors are introducing close coupling between engineering and manufacturing. The automotive industry is a prime example, where the leading companies are driving down product life cycles and increasing the quality of design for manufacture through close coupling using a wide range of mechanisms. Whether close coupling is required in every sector in an unanswered question. It is difficult to determine the degree to which coupling, in operations strategy terms, is a positioning choice, or if strong coupling should be seen as general good practice. Our empirical evidence indicated that strong coupling between engineering and manufacturing is important when the market-based priorities include fast product development times, but that customization and contract design may be handled with loose coupling. The companies in our sample pursuing strong DRIVERS FOR STRONG COUPLING. coupling were similar in having relatively frequent new product initiatives. All were driven to improve the product introduction process. For example, in the vehicle companies, the aim was to reduce product development lead times, and one claimed to have reduced the time for its latest project to the then-industry average of four years, with one brand new vehicle developed in less than three years. In a vehicle components company, a history of failed product development initiatives had stimulated a move towards stronger coupling. In another, the aim of reducing costs by 30% over 18 months had given the mandate for a significant change in product development methods. A particular target for this company was the reduction of the number of very expensive and slow engineering change orders (ECO) by getting manufacturing input to each design before it was signed off and hence develop more reliable EC0 procedures. For another company that already had strong coupling, its business strategy of being a follower in developments in product technology meant that product development lead times needed to be very quick to respond to competitors’ initiatives-over the last 12 years they have reduced product development times from 18 months to 6 months. From Choice to Strategy The manufacturing strategy literature views choices in terms of structure and infrastructure (Hill 1985 ) and the positioning on the product-process matrix (Hayes and Wheelwright 1984). The three sets of choices outlined above can be reviewed in terms of these two frameworks as strategic choices and positioning.
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5. Positioning
in Engineering
and Manufacturing
In reviewing the data from the 15 companies studied, we found that there were a variety of information flows associated with different order patterns, product routes, volumes, and processes. These can be viewed on two dimensions: first, customer specificity (the degree to which products are engineered for specific customers), and second, product volume. This is derived from Hayes and Wheelwright ( 1984), however, we have chosen to modify the vertical axis. Rather than use variety, which is not specific enough to capture the differences in engineering input required in different contexts, we chose to use customer specificity. We propose four types of positioning; illustrated in Figure 1: l Design for customer. This positioning was found in companies who were design or concept to order, typically through a customer tender or procurement route, and had flexible process technology, information flow, and a low volume. These were characterized by the defense companies in our sample. l Response. These companies are typically seeking to respond rapidly to markets and customers. They have a development route for product development and pursue manufacturing polices leading to responsive manufacturing. The companies in this category in our sample focused on low volume batch manufacturing. The two case companies in this category were mechanical engineering companies which successfully competed in global markets. The history of.both these companies suggests that they may represent an emergent type of positioning which can be described as response led positioning. These companies are focusing on rapid development of new products using “lean production.” l Muss customization. At higher volume levels, we find the mass customizers, who have built an additional set of capabilities that enables them to rapidly configure or customize for their customers. Again, we see this as an emergent type of generic positioning (Pine et al. 1993). l Muss production. This is the traditional low cost manufacturing and is characterized by a make to order or forecast, relatively dedicated batch or line process technologies, a development route product development pattern, and high unit volume. Dynamics of Positioning We can view dynamics in a similar manner to that proposed by Hayes and Wheelwright ( 1984). The diagonal on Figure 2 represents the traditional viable positioning of com-
*
FIGURE I. Positioning.
Vohme
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clustomer ’
Specificity
Posidon of compaldes AandD
Volume
FIGURE 2. Changes in Positioning.
panies. Below the diagonal, the capability to provide engineering value added for customers requiring highly specific designs may not be sufficient; in addition, the manufacturing process may be inappropriate. Above the diagonal there are likely to be severe cost penalties unless mass customization technologies are used. We can illustrate this with two of the case studies from our research (companies A and D), who were both located below the diagonal position. Both had recognized the problems associated with this position in that both were serving markets that were medium volume, potentially high customer specificity, with medium volume batch manufacture but without the engineering capability to respond to customer needs. Both were only just starting to develop a capability for rapid product development to increase the value added within their operations. Figure 2 indicates that there should be three possible moves for these companies: to move to design-led positioning, to move to response positioning, or to develop the capability of mass customization. Company A’s strategy was to move towards a strong design capability and to restructure its manufacturing capability for low volumes and higher responsiveness in “engineered” products. Company D planned to move more towards a rapid response and high quality development route as it shifted to “black box” design for its customers. Neither had chosen to move to mass customization. In both cases, the implementation of CAD/CAM systems was seen as central to these shifts in positioning.
6. Incorporating Engineering into Operations Strategy
We have argued that to meet customer needs in the market place, we need an operating strategy that brings engineering and manufacturing strategy together. From the above evidence and discussion, we can develop two sets of propositions. From a Manufacturing Mission to a Manufacturing System Mission
We propose that no longer can a company think of itself in terms of functions; it must think of itself in terms of a manufacturing system. The development of mission statements is widespread in manufacturing companies, supported by many approaches such as the order-winning criteria described earlier. In considering how companies can respond strategically to the operating performance requirements required by the market, we must
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look to both manufacturing and engineering. In addition, we must not just look to the capabilities of individual functions to support the mission; the ability to achieve these goals depends also on the ability of manufacturing and engineering to link together as a single system. Traditionally, companies have taken market-based priorities and translated them into a manufacturing mission. A manufacturing mission or task is “one or two of the (performance) objectives and is derived from the firm’s competitive strategy, economics and technological opportunities” (Skinner 1992). We propose that this must be a manufacturing system mission; that is, what has to be achieved by the total manufacturing system in order to satisfy customers. The manufacturing system mission can then be translated into required capabilities for manufacturing, engineering, and the combined manufacturing and engineering system. This is illustrated in Figure 3. Such a translation requires an appropriate process of strategy development. A study of this found that in many firms, the manufacturing strategy development process was relatively new (Maruchek, Pannesi and Anderson 1992 ) . Most firms had started by developing a manufacturing mission which was ‘a statement of how to be successful in the business and how manufacturing could best support the business.’ This then led to the development of manufacturing objectives. We foresee a parallel, but expanded, process if engineering is to be included. They key process elements would be first, to include*engineering and technology development managers in the mission development process, and second, to expand the scope of the mission statement and objectives. The latter is described in more detail later. Making Strategic Choices in Manufacturing and Engineering
Strategic choices have been well studied in the manufacturing literature (Hayes and Wheelwright 1984; Hill 1985). They have usually been stated in terms of choice in process and infrastructure. These choices need to be both consistent with each other (internal consistency), and with the company’s strategy (external consistency). In contrast, a review of the literature indicates that little has been published on the strategic choices
DEVELOPING A COMBINED MISSION
+ MANUFACTURINQ SYSTEM MISSION
ftoaponoo through MANUMCtURlNQ CAMBILITY
FIGURE
Rorponro through LINKED CAMBILITY
3. Developing a Combined Mission.
Rorponoo through ENQINEERINQ CAMBILITY
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both within engineering and to achieve linked capability between engineering and manufacturing. In a study of the links between engineering and manufacturing, Coughlan and Voss ( 1992) describe these strategic choices in terms of process, people, and tools. Process includes the processes of concurrent engineering, fast ramp-up of new products, and the use of prototyping. People encompasses the organization, teamwork, integration mechanisms, etc. required to effectively link manufacturing and engineering. Tools includes those tools that support cross-functional involvement such as Quality Function Deployment and Process FMEA and systems such as CAD/CAM, rapid prototyping, ComputerAided Logistics Systems (CALS), and quality systems involving manufacturing and engineering. Within engineering, there are a similar set of strategic choices in people, process, and tools: ( 1) process-including project selection and evaluation, creativity development, technology acquisition, make versus buy policies, and choice of technologies; (2) peopleincluding the organization of project teams, the management of the dual ladder, links with technology suppliers; and (3) tools-including simulation, design of experiments, Computer Aided Engineering ( CAE), and finite element analysis. These strategic choices fall naturally into three categories: choices in manufacturing, choices in engineering, and linked choices. The latter are particularly important, as they require effective organizational links between functions at the policy development stage. A selection of potential choices is shown in Table 2. This set of choices presents a number of challenges for management. A company must have a process of strategy development that effectively brings together participants from different functions to ensure effective communication and collaboration in strategy setting. In the competitive world of the 1990s and beyond, functionally based strategy setting will not suffice. Unfortunately, our field research found few firms that had effective crossfunctional strategic processes. The second challenge is to ensure internal consistency. This has proved difficult for most firms within the manufacturing function, linked strategies will present an additional level of complexity from which simplicity and focus must be developed.
TABLE
2
Strategic Choices: The Content of Manufacturing and Engineering Strategies
Manufacturing
PrOCess
Choices
Linked Choices Process Concurrent engineering Level 0 prototyping, fast product ramp-up Performance measurement Order strategies Route for development People Coupling Cross-functional team work, co-location, organizational integration mechanisms Tools QFD, CALS, CAD/CAM, rapid prototyping Design for manufacture Design for cost
Engineering Choices Process Project selection and evaluation, creativity, product planning, technology planning and acquisition, licensing in and out, technology choice Develop versus buy Technological forecasting People Team organization, links with suppliers, customers, promoting early involvement Tools Simulation, design of experiments (Taguchi), computer-aided engineering, finite element analysis
Choice of process Facilities location and size Make versus buy Vertical integration
Infrastructurt! Quality management Manufacturing planning and control systems Manufacturing technology Work organization Supplier relations Manufacturing systems Information systems Lean production Control
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The final challenge is to develop a coherent set of strategic choices in all of these areas so that real competitive advantage is gained from the full manufacturing system. At one level, they must reflect best in class practice in the key areas chosen. Together, it is likely that the focused factory must evolve into the focused manufacturing company, one where the processes, infrastructure, systems, and tools in all areas are aligned around a limited set of market-based tasks.
7. Summary Implications for Research
As stated earlier, research in manufacturing strategy has been based on a narrow focus on the process and infrastructure of manufacturing. There are a number of implications from research arising from this article. First, we propose a broader scope for manufacturing strategy. For example, in Table 2, a set of engineering and linked strategic choices are proposed. This is a partial list; there is a need for field research to identify in greater detail the strategic choices facing engineering and manufacturing. The rapid development of new technologies, both within engineering and to link engineering, manufacturing, suppliers and customers, and the development of more sophisticated organizational forms, such as the virtual factory, all lead to the need to understand more fully this area. Development of understanding in this area may come from detailed, case-based empirical research. A second research need is related to these strategic choices. What are the factors that influence these choices? Are firm size, industry, market and/or manufacturing process important in making choices. These are questions that are important to both integrating engineering into the theory of manufacturing strategy, and in helping firms operationalize the findings. Another potential research focus is to study the impact of engineering and manufacturing strategies on performance. If the propositions put forward in this paper hold, then firms with internal consistency between manufacturing and engineering choices, and external consistency between engineering, manufacturing, and the market place will have superior performance. This proposition needs to be tested through large-scale empirical research. Finally, an important question is how this may be made to happen. There is a need to extend research into the process of manufacturing strategy formulation. In particular, the issues concerned with involvement of a wider range of functions need to be examined. Learning perspectives (Leonard-Barton 1992) may assist in research into implementation of cross-functional manufacturing system strategies.
TABLE
From Traditional to Linked
3
in Manufacturing
Strategies
Traditional Manufacturing Strategy Focus on the single function Gain competitive advantage through manufacturing Develop a manufacturing mission Functional strategic choices A functional approach for strategy development
Linked Strategies Focus on the total product realization process and the supply chain Gain competitive advantage through manufacturing system capability Develop a manufacturing systems mission highlighting the response from engineering, manufacturing, and linked capability Focus on joint strategic choices and functional choices A cross-functional, team approach for strategy development
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Conclusions
As put forward at the start of this article, the arguments for viewing manufacturing and engineering together as a single unit in developing an operations strategy are too strong to ignore. We have used empirical research to explore this and identify some of the content of an expanded scope of manufacturing strategies. We have argued that the operations strategy must move from the traditional functional focus to a new approach, as shown in Table 3. We have proposed that companies must move towards a manufacturing systems mission, and need to take a broader view of strategic choices, embracing engineering and combined engineering and manufacturing choices, as well as the well-established manufacturing choices. Some potential choices have been outlined using a process, people, and tools structure. Finally, we have argued that the challenge for companies is to develop strategies that ensure internal consistency and that comprise a coherent set of choices, moving from the focused factory towards the focused manufacturing company. This broader view of manufacturing strategy raises many questions for further research, some of which have been outlined. Companies who fail to take these lessons on board risk being left behind in the competitive race against companies who are exploiting all of their capabilities and the links between them.’
’ The authors gratefully acknowledge the support of the Science and Engineering Research Council, the ESRC/SERC joint committee who funded this research, and the valuable comments of Professor Wickham Skinner and two anonymous reviewers. APPENDIX
Research Data
Company A B C D E F G H I J K L M N 0
Product Building components Mechanical engineering Electrical engineering Hydraulic components Aerospace Vehicle components Shipbuilding Heavy engineering Heavy engineering Vehicles Aerospace components Vehicles Vehicle components Mechanical engineering Vehicle components
Parent Origin UK Independent UK UK UK EEC UK UK UK Independent UK UK UK us UK
Unit Size 500 914 1,230 176 4,500 800 12,000 1,210 2,200 12,000 1,400 38,000 2,500 1,100 4,000
Order Pattern MtF MtF DtO MtO/F cto MtO/F cto DtO DtO MtF DtO MtF MtO/F MtO/C MtO
Development Route Tender Development Tender Tender Procurement Development Procurement Tender Tender Development Tender Development Development Development Development
Volume/ Process High/batch Low/batch Low/one-off High/batch Low/one-off High/batch Low/one-off Low/one-off Low/one-off High/line Low/batch High/line High/line Low/batch High/batch
MtF: Make to Forecast; DtO: Design to Order; MtO/F: Make to Order/Forecasts; CtO: Concept to Order; MtO/C: Make to Order/Concept to Order.
References
T. HILL ( 1992), “Linking Systems to Strategy,” International Journal of Operations and 12, IO, 3- 15. Performance, Harvard Business School Press, CLARK, K. AND T. FWJIMOTO ( 1991), Product Development Boston, MA.
AND
BERRY, W. L.
Production
Management,
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A. VOSS AND GRAHAM
M. WINCH
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