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Manufacturing

processes and outputs to dynamic and sometimes volatile 3. Determine the order winners and order qualifiers for
customer needs. An important component of flexibility is each group.
the ability to develop different products and deliver them 4. Convert order winners into specific performance
to market. As new technologies and processes become requirements.
widespread, a company must be able to respond to mar- It has been said that America’s resurgence in manufac-
ket demands more and more quickly if it is to continue to turing is not the result of U.S. firms being better innova-
be successful.
tors than most foreign competitors. This has been true for
Manufacturing strategy must be linked vertically to a long time. Rather, it is because U.S. firms are proving to
the customer and horizontally to other parts of the enter-
be very effective copiers, having spent a decade examining
prise. Underlying this framework is senior management’s
the advantages of foreign rivals in product development,
strategic vision of the firm. This vision identifies, in gen- production operations, supply chain management, and
eral terms, the target market, the firm’s product line, and corporate governance then putting in place functional
its core enterprise and operations capabilities. The choice equivalents that incrementally improve on their best tech-
of a target market can be difficult, but it must be made. niques. Four main adaptations on the part of U.S. firms
Indeed, it may lead to turning away business—ruling out underscore this success:
a customer segment that would simply be unprofitable or
too hard to serve given the firm’s capabilities. Core capa- 1. New approaches to product-development team
bilities are those skills that differentiate the manufacturing structure and management have resulted in getting
from its competitors. products to market faster, with better designs and
In general, customers’ new-product or current-prod- manufacturability.
uct requirements set the performance priorities that then 2. Companies have improved their manufacturing
become the required priorities for operations. Manufac- facilities through dramatic reductions of work-in-
turing organizations have a linkage of priorities because process, space, tool costs, and human effort, while
they cannot satisfy customer needs without the involve- simultaneously improving quality and flexibility.
ment of R&D and distribution and without the direct or
3. New methods of customer-supplier cooperation,
indirect support of financial management, human
which borrow from the Japanese keiretsu (large hold-
resource management, and information management.
ing companies) practices of close linkages but main-
Given its performance requirements, a manufacturing
tain the independence of the organizations desired
division uses its capabilities to achieve these priority goals by U.S. companies, have been put in place.
in order to complete sales. These capabilities include tech-
nology, systems, and people. CIM, JIT, and TQM repre- 4. Better leadership—through strong, independent
boards of directors who will dismiss managers who
sent fundamental concepts and tools used in each of the
are not doing their jobs effectively—now exists.
three areas.
Suppliers do not become suppliers unless their capa- In sum, the last few decades of the twentieth century
bilities in the management of technology, systems, and witnessed tremendous change and advancement in the
people reach acceptable levels. In addition, most manufac- means of producing goods and the manner of managing
turing capabilities are now subjected to the “make-or-buy” these operations that have led to higher levels of quality
decision. It is current practice among world-class manu- and quantity as well as greater efficiency in the use of
facturers to subject each part of a manufacturing opera- resources. In the new millennium, because of global com-
tion to the question: If we are not among the best in the petition and the expansive use of new technologies,
world at, say, metal forming, should we be doing this at including the Internet, a successful firm will be one that is
all, or should we subcontract to someone who is the best? competitive with new products and services that are cre-
The main objectives of manufacturing strategy devel- atively marketed and effectively financed. Yet what is
opment are (1) to translate required priorities into specific becoming increasingly critical is the ability to develop
performance requirements for operations and (2) to make manufacturing practices that provide unique benefits to
the necessary plans to assure that manufacturing capabili- the products. The organization that can develop superior
ties are sufficient to accomplish them. Developing priori- products, sell them at lower prices, and deliver them to
ties involves the following steps: their customers in a timely manner stands to become a
formidable presence in the marketplace.
1. Segment the market according to the product
group. SEE ALSO Factors of Production
2. Identify the product requirements, demand patterns,
and profit margins of each group. Thomas Haynes

486 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION