Process Focus Strategy – Low Volume, High Variety
A process focused strategy centres around the processes used to build products, grouping similar resources together in work cells. It is best employed by companies that output low volume, differentiated products with high levels of customisation i.e. products that are typically unique to the customer. Commonly referred to as “job shops”, examples include machine shops, aircraft infra-red suppressor manufacturers, custom carpenters and beauty salons. Due to the high variability from one job to the next, they require a well-trained, skilled, flexible workforce, and use high levels of raw materials – therefore variable costs are high relative to fixed costs. Utilization of resources is very low (between 5-20%), as forecasting is difficult, although not impossible – there may be seasonal trends or other demand influencing factors such as current fashions or medical outbreaks. They tend to build to order and carry very little if any finished goods inventory – for the majority of the time material is in WIP (work in progress) undergoing value-added operations, and the sequence of tasks (i.e. the specific order work cells are visited) can vary significantly from one product to the next. The Process Focus strategy is therefore termed ‘intermittent’.
Product Focus Strategy – High Volume, Low Variety
Polar opposite to the Process Focus strategy is a Product Focus strategy, which concentrates on optimising the factory lay-out for very low variety (possibly a single item e.g. a plastic curtain hook) but very high volume manufacturing. The process is highly linear and can run for long periods of time - possibly non-stop with multiple shifts of workers, hence it is referred to as a ‘continuous’ process. Automation moves WIP rapidly from one stage to the next resulting in a high utilization of resources (70-90%). Capital investment in equipment can be large and both equipment and process failures are highly undesirable resulting in potential large loss of product. Contingency plans need to be in place to ensure that production can continue during times of equipment maintenance and repair. Inspections throughout the process ensure that it remains within certain limits – this can be controlled by statistical process control methods using computer generated data (e.g. temperature, mass etc). There are only a few work instructions, and the workforce is generally small and not broadly trained due to the low flexibility of the process – the majority of the workers are less skilled than in the constantly changing Process Focused facility. Raw material expenditure is generally low and raw materials are quickly consumed. Production rates are set based on forecasts and repeat orders with finished goods inventory typically high. Variable costs (material and labour) are therefore generally lower and fixed costs higher than a process focused strategy.
Repetitive Focus Strategy
Repetitive Focus combines aspects of both Process Focus and Product Focus, and as a production strategy lies somewhere between the two in terms of production volume and flexibility - less flexibility but higher volume when compared to the process focused approach, and vice versa when compared to the product focused approach. It is termed ‘modular’, since lower level assemblies are manufactured in modules off of the main assembly line and brought together in a continuous production process to produce a somewhat custom product. The modular components are also generally manufactured in a continuous process. The process relies heavily on interchangeable parts produced by each module, a concept developed by Honoré Blanc in France in the 18th century, and popularized by Eli Whitney in the USA shortly thereafter. Repetitive manufacturing is the quintessential assembly line as employed by the automobile, appliance and electronics industries, as well as others, with the fundamental advantage being that the main assembly occurs in stages which are repeated time and time again (from one unit to the next) by a semi-skilled workforce trained to do their particular job in an efficient manner. Product therefore emerges from the line at a rate equal to the time taken to complete the slowest single operation, so that in an assembly line of many repeatable operations, the rate of production can be high compared to the time taken to manufacture a single unit. Analyses are performed to ensure the ergonomics of the work station (e.g. tool location, material handling methods etc) are optimised so that no time is wasted and the worker is as comfortable as possible. Still, any one individual’s job can become tedious and injury can result from repetitive strain. There can also be some disassociation of workers from the final product since they only work in the one area in which they are focused and trained. It is the task of management to control and negate these potential issues.
Raw material consumption typically operates under a Just-in-Time protocol, while the modules and assemblies move by mechanical means from one stage to the next, and production levels are guided by forecasting.
Mass Customization Strategy - High Volume, High Variety
The most difficult and hence the riskiest production process to implement, Mass Customization aims to achieve high levels of flexibility at high production volumes. Unlike the Process Focus approach, which can be highly flexible with an almost unlimited product range (within the capacity of the processes available) and has typically accepted long production times, mass customization must give the impression of an almost unlimited product range by anticipating the needs of the customer and tailoring sufficient options (modules) to suit that demand in as short a time as possible. The rise of mass customization has been accelerated by the introduction of technology and primarily the internet which allows the average consumer to build a product to their own specification and expect delivery within a matter of days or even hours. Achieving or not achieving a sufficient level of flexibility (variety of product) can be the difference between success and failure when volumes are high. Too much flexibility means that production will not be able to react fast enough to satisfy demand; too little flexibility and the consumer will not be able to create the product (they think) they need. In both cases, company reputation will suffer rapidly and possibly irrevocably at the hands of online critics.
Mass customisation relies on flexibility both of its workforce and its equipment in order to adapt to the many different custom demands which need to be processed rapidly and built-to-order. Costs are optimized by keep inventory low using techniques such as JIT, lean and kanban. To make the strategy viable, variable costs must be kept low relative to fixed costs; companies employ methods such as postponement to delay customisation as late in the process as possible thereby benefitting from high levels of utilization seen in a more typical continuous production approach. In such a time-critical yet flexible process, the supply chain must be extraordinarily well-managed which requires having best-in-class relationships with suppliers. The risks of mass customisation are high, and failure is a very real possibility, but by not implementing such a strategy a business may well be left behind by its competitors who reap the rewards of higher margins and increased market-share.
Note that the impression of mass customisation can be partially achieved by offering options which correspond to existing inventory, but the number of combinations available is then limited and the economic benefits that come from streamlined supply chains and low inventory costs are not generally realized.