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STRATEGIC PLANNING Does Your Operation Fit Your Product Mix?

Is price the reason people purchase from you?  Maybe it's delivery or quality.  In determining where to position a company, leadership has to address the issue of what to offer and promote to the company's customer base.  Let's take a look at companies involved with some type of manufacturing.  Manufacturers, as part of strategic planning, must create a product with enough margin in order to create a profit.  In simple terms, the organization develops a product and then must be able to create the product in a facility conducive to its creation.  The breakdown may be as follows:


·        Job Shop—Individual units that tend to be very customized and require highly skilled labor.

·        Flex or Batch Shop—Groups or products are created with similarity between products.

·        Line Shop—Mass production where, most likely, automation and repetitive tasks are necessary.  Labor is not as skilled, functioning not as craftsmen but as operators.

In all three examples, each area must compete in different markets.  If you needed to purchase a specialized part for a custom-built steam generation plant, you might use a machine shop (a type of job shop) that can deliver the product you need within the specifications.  In this scenario, you realize it's a one-of-a-kind item and the final product must be perfect.  A job shop would be perfect for your needs.  On the other hand, if you were in need of a more standardized product in large quantities, such as 200 t-shirts with your logo on them for your employees, a job shop would most likely give you a price that would be way out of line with expected value.  A batch flow or flexible manufacturing facility would offer the delivery, quality, and price that would be more subject to competitive forces and would have tools in place to manufacture larger quantities. Quality of the vendor will be important, but getting a reasonable price is a larger part of the equation.  Lastly, commodity items like surgical needs and semiconductor chips are made in high volume with little difference between products from vendor to vendor.  (Note: New products to market are not yet commodities.)  At this point, a case of paper from Staples, Viking, or Sam's Club will give you white paper to use in your copier.  Price and develop-ability are often the important variables.


If you are creating products that move on the scale from single units to commodity, your pricing, delivery and service may be valued at different levels and your strategic plan should emphasis these variables.  Customers will expect to pay more for the customized individual unit since they realize the work involved.  Do not short-change your profits by pricing as if you are in a commodity business.  Line shops, on the other hand, are operations with little variation in finished products.  Day One of the month and Day 15 are still cranking out yo-yo's.  Streamlining to fit price and inventory levels and to meet delivery are critical, while, again, quality is a given.


Evaluate your operations.  Check to see what type of business you actually offer.  Trying to be one business and set-up like another is death.  Are you in line with competition?  Ask yourself what you do, how you do it, and to whom you sell?


A great book on manufacturing concepts that reads like a story is The Goal by Eliyahu M Goldratt.  The concepts can apply to any type of business........and it's easy to read.

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01.08.2019 (535 days ago)
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