CRAFT PRODUCTION• For centuries , value chain configuration was based on the notion of craft• Everything was crafted by the hands of someone who has the requisite materials, tools, and most importantly skills.• Craft production utilized human sources of energy and the skills, knowledge, and attitudes of the craftsman rather than utilizing a physically embodied technology.• The level of technology associated with craft production is relatively low• Craft production allows only small batches to be produced at a time• Craft production also requires that the suppliers of goods and services interface with the customers quite frequently• Each product was customized to the specific needs of the customer• Small batch and high variety – means that the value chain operation is relatively low.
• The industrial revolution made possible the replacement of human sources energy by mechanical sources.• The mode of configuring value chains followed 2 distinct paths due to this revolution.1. Augmentation of craftsman skills by machines and processes by allowing the worker to embody his source of knowledge in more varied products. Thus, more flexible the machine, and the more widely applicable the process, the more it expanded the craftsman’s capacity for productive expressions.2. Mass production that could reduce the cost of making any particular good by substituting human skills by machinery enabling scale of production (economies of production)
MASS PRODUCTION• Mass production practices arose in response to the demand for producing goods on a larger scale and volume• Mass production relies on several principles relating to the configuration of value chains and the system of management.
The Value Chain ConfigurationMass production is based on 5 major principlesof value chain configuration1. Interchangeable Parts2. Specialized Machines3. Focus on the Process of Production4. Division of Labor5. Flow of the Product (automatic / systematic movement from one to another worker)
The System of Management.Mass production involves 7 major principles ofManagement1. Focus on Low Cost and Low Prices2. Economies of Scale3. Product Standardization4. Degree of Specialization5. Operational Efficiency6. Hierarchical Organization7. Vertical Integration
LEAN PRODUCTION4 major ideas in Lean Production1. Team Organization2. Training (for a variety of job related functions)3. Continuous Improvement4. Just in Time (JIT) Manufacturing Systems
MASS CUSTOMIZATION• Mass Customization is the synthesis of two long-competing systems of management – craft and mass production.• Mass customization involves the value chain operations in individually customized goods and services on a mass scale.• Information and other technologies enable firms to customize goods and services to meet consumer demand, often at prices at or below those of mass producers.• Due to the movement from mass production to mass customization, all aspects of the value chain – from inbound to outbound logistics get affected.• In mass production, low costs are achieved primarily through economies of scale whereas economies of scope drive the low costs in mass customization• Economies of scope is said to exist when a single process can be employed to produce a greater variety of products or services more cheaply and more quickly.• Often companies can achieve economies of both scale and scope.• Mass customization relies on several principles related to system of value chain configuration and the system of management.
Value Chain Configuration1. Flexible Manufacturing Systems2. Computer Aided Design / Computer Aided Manufacturing (CAD / CAM)3. Computer Integrated Manufacturing4. Use of Information and Telecommunication Technologies.5. Use of Computerized Databases
The System of Management.1. Just In Time Delivery2. Reducing Set Up and Changeover Times3. Compressing Cycle Times4. Production to Order