The document discusses strategies for production management. It begins by defining production strategies and why they are important for providing clarity, establishing priorities, and promoting adaptability. It then describes six common types of production strategies: assemble-to-order, level production, chase strategy, make-to-stock, make-to-order, and engineer-to-order. Finally, it outlines a six-step process for creating an effective production strategy, which includes setting goals, identifying experts, analyzing strengths/weaknesses, developing the strategy, visualizing the strategy, and implementing it. The strategy is intended to guide long-term production decisions and ensure goals are met.

1. AdvanceStrategiesinproductionmanagement
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P r e p a r e d b y : A l a n B . Z u l u e t a & D i x i e L . C o l i b a o

2. What?
What are production strategies?
Production strategies are long-term plans
for the production of goods and services.
They aim to achieve a central goal or
objective established by a company's
management team. A production strategy
functions as a guide for the production
department by determining the type of
technology to use, the level of investment
for production, the production schedule,
and what kind of training the production
staff may require.

3. Why?
Why are production strategies
important?
When companies develop a production
strategy, they establish a high level of
preparation that informs future
decisions. This strategy can help
minimize risks and increase work output.
Here are some reasons why production
strategies are essential:

4. Why?
Why are production strategies
important?
Provide clarity
A comprehensive production strategy
encourages the management team to take the
time to define and decide what the company's
primary goal is. This decision helps
management determine the sub-goals and
what actions are necessary to accomplish
them. With this clarity in place, the production
team can understand the objective, the scope
of the project, and work together more
efficiently.

5. Why?
Why are production strategies
important?
Establish priorities
Production strategies help large and small
businesses determine what the priorities are
in production. For example, a small company
with limited resources, whether capital or
personnel, can allocate them more effectively
when guided by a strategy. As a result,
production costs can stay low, team members
can receive the support they require, and
team leads understand how to prioritize
functions or tasks to maintain productivity.

6. Why?
Why are production strategies
important?
Promote adaptability
Every project encounters challenges, and how a
team overcomes these challenges can determine
the project's outcome. When developing a
production strategy, it's helpful to consider risks
that may arise throughout the production cycle.
Having a clear production strategy as a
reference point nurtures adaptability within the
team and helps them make strategic decisions,
even if the unexpected occurs.

7. Typesof Productions
Strategies
1. Assemble-to-order
2. Level production
3. Chase strategy
4. Make-to-stock
5. Make-to-order
6. Engineer-to-order

8. Typesof Productions
Strategies
Assemble-to-order
Assemble-to-order (ATO) is a production strategy
where companies produce products on a
customer-order basis, storing their inventory as
assembly-ready components. This means that
companies possess the necessary parts of these
goods and only proceed to assemble these items
when they receive orders. As a result, companies
that employ this strategy avoid stocking large
quantities of products, which can help reduce
inventory costs.
Because production depends on the number of
ordered items, businesses can typically mass-
produce these items according to a buyer's
specifications. This can give these companies a
market advantage, as they can meet demand and
provide goods or services to their clients more
quickly.

9. Typesof Productions
Strategies
Level production
Level production focuses on producing the
same number of units per product at a
consistent rate regardless of market
demand. This strategy lowers productions
costs and minimizes the risk of carrying
obsolete goods. Industries with limited
production capabilities and cyclical needs
typically use this type of production strategy.
With a level production strategy, companies
can keep stocking inventory during non-peak
seasons while being ready to ship at a higher
volume when demand increases.
For example, the fast-food industry uses a
level production strategy. Companies in this
industry typically function in a high-demand
and low-margin scenario for the products
they sell. The level production strategy
ensures production consistently meets
demand.

10. Typesof Productions
Strategies
Chase strategy
The chase strategy is when a company's
production matches the demand set forth by the
market. This process is a lean production strategy
because inventory costs stay low, and the
production schedule functions on an order basis,
which minimizes the risk of having unsold
products. It also promotes the efficient use of
manufacturing resources and ensures a
company's production capacity remains flexible to
adjust for market demands. The chase strategy is
helpful for businesses with limited resources, and
those that manufacture products for niche
markets.
For example, companies that produce Halloween
items typically use the chase strategy. Demand
for these types of products has a set timeframe.
This awareness of when demand increases can
help the production department adjust its
manufacturing processes.

11. Typesof Productions
Strategies
Make-to-stock
The make-to-order (MTO) strategy relies
on receiving orders to manufacture
products. This production method
prevents businesses from creating a
dependence on market demand and
helps them simplify inventory control.
MTO is typically present in companies
that offer customization of their products,
such as those producing computer
hardware, industrial equipment, and
automobile components.

12. Typesof Productions
Strategies
. Engineer-to-order
The engineer-to-order (ETO) strategy is
similar to MTO in that the manufacturing
of products relies on first receiving
orders. The one main distinction between
these two strategies is that, unlike MTO,
ETO involves the design or engineering
of an ordered product. Companies that
use this strategy may only carry an
inventory of standard components, like
chemicals and steel.

13. Sixstepsto Createa
Production Strategy
Mostcompaniesstrivetobecomebetteratadaptingtochangesinthebusiness
environment.Intoday'sglobalizedeconomy,marketfluctuationsandchangesin
customers'preferencesmovequicklyandarefeltinchangesinthedemandpattern.In
production,thisisfeltalmostimmediatelybecausestocklevelsareusuallykeptlow.
Everyonewhoworksinproductionmust,therefore,adaptandbeabletoreactquicklyto
whathappensaroundus.Inmanycompanies,theemployeeshavenowbecome
accustomedtothissituationandtherequirementforflexibilitycaninmanywaysbe
consideredbothhealthyandnatural.Thisisapartoftheleanphilosophy.

14. Sixstepstocreatea
productionstrategy
Step 1: Set challenging long-term goals
• Normal efficiency improvement rate is often around
6% a year. Many companies can handle this level
with their normal capacity to expand. 6% a year over
five years represents an improvement of 34% over
the period.
• This means that, if your aim is to increase
productivity by only 34% over five years you will not
need any development strategy to achieve it!
• World-class companies manage to sustain
improvements in the production of 15% a year. This
equates to a doubling of production over a five-year
period. If you set this type of target, you will need a
strategy to succeed. Let's start creating!
• Obviously one goal will not be sufficient. If you only
focus on productivity increase, it is easy to come up
with solutions like "tear down the factory and build a
new one". You need a ceiling for investment levels,
stock levels, and total costs.

15. Sixstepstocreatea
productionstrategy
Step 2: Identify an expert
• The ideal expert is someone you trust. It could be someone
who works for the company, or it could be a consultant.
• The important thing is that the personal chemistry is right.
Your expert must be able to work together with you and mix
with your associates at all levels.
• Your expert must also have a broad knowledge base. To
have undertaken a similar task earlier is an obvious
requirement as is being fully conversant with all aspects in
the lean toolbox. If we're dealing with the production
process he/she also requires an understanding of other
ways of getting results, such as Six Sigma, production-
related IT solutions, maintenance, and production finance.
Every challenge is unique, so it's a case of not falling into
the same old rut as before.
• A knowledge of your specific industry is of course desirable,
but the most important aspect is that your expert has
experience from several industries so that he/she can
distinguish between what is related to your industry and
what is generally applicable.

16. Sixstepstocreatea
productionstrategy
Step 3: Identify where the potential is greatest
• Each production strategy must be based on the company's
unique situation. A company often focuses on costs and
growth. It would make sense to study the financial picture
to identify which area has the greatest potential.
• With your expert's help, go through each area of cost and
estimate how much this could be reduced, per item
produced. In some industries, the greatest potential lies in
reduced consumption of raw materials or energy, others in
personnel costs per produced item, while, for some, the
potential is in maintenance costs. Then produce a
breakdown of how improved production can increase sales,
for example because of improved security of supply or an
improved level of quality.
• Using this, you will get an indication of where to
concentrate your efforts to achieve your goals and you can
sharpen your focus somewhat.

17. Sixstepstocreatea
productionstrategy
Step 4: Draw up a thorough situation analysis
The next step is to draw up a comprehensive situation
analysis. This is where your expert starts working in earnest. I
recommend you carry out a detailed analysis that covers the
total production function. If your analysis is too superficial the
strategy will only be able to recommend further studies but will
not give any direction. You need to be most accurate in the
area with the highest potential for financial improvement. The
analysis needs to have a "hard" and a "soft" aspect. "Hard"
focuses on measurable factors and outlines areas like:
• Technical capacity - this includes production efficiency (OEE),
stability, utilization and shift work
• Costs, including costs of shortages, costs of quality and
maintenance
• Capitalization, setup times, lead times and batch sizes.
• Bottlenecks – where and when
• Layout and flow
• Personnel requirement per unit or process

18. Sixstepstocreatea
productionstrategy
Step 4: Draw up a thorough situation analysis
The "soft" analysis could, in fact, be based on
interviews. It identifies other important factors that are
not easily measurable. The aim is to get an idea about
questions like:
• Styles of working, culture and co-operation
• Standardized working methods
• Care and cleanliness of the equipment
• How improvements are implemented
The capacity and experience available to carry out the
necessary projects
By analyzing the final material, the strong and weak
aspects can be identified. Suggestions for
improvement can be documented, and we can
calculate the size of the areas of high potential.
Consult with personnel about the situation analysis to
confirm the quality of the findings and provide them
with the relevant feedback.

19. Sixstepstocreatea
productionstrategy
Step 5: Develop the strategy
The strategy develops out of the situation
analysis you have drawn up. Your expert,
together with a working group, examines
the different scenarios, sketches different
layouts, calculates results vs. targets and
assesses feasibility. This needs to be a
continual process with a multi-functional
approach.

20. Sixstepstocreatea
productionstrategy
Step 5: Develop the strategy
One set of tools is seldom sufficient to
attain your goals. Instead, you often need
all the relevant tools to achieve your aims
efficiently. A few examples of what could
be included in a development strategy
are concrete strategies for:
• Improving the stability of the process by, for example, using
statistical methods to fine-tune the operation and introduce an
automatic overall control
• Identifying which key data are the most relevant e.g. OEE
measurement
• How and whether IT support should be used to support decisions
based on facts, optimization and to automate labour-intensive
processes
• How bottlenecks come about and where investment is called for
• How to improve layouts and flows to minimize the number of
unnecessary operations and free up floor space for new production
• How lead times and tied-up capital can be reduced e.g. by
examining set-up times, paced flows, leveling and introducing a
Kanban system

21. Sixstepstocreatea
productionstrategy
Step 5: Develop the strategy
One set of tools is seldom sufficient to attain your
goals. Instead, you often need all the relevant tools to
achieve your aims efficiently. A few examples of what
could be included in a development strategy are
concrete strategies for:
• Improving the stability of the process by, for example, using
statistical methods to fine-tune the operation and introduce
an automatic overall control
• Identifying which key data are the most relevant e.g. OEE
measurement
• How and whether IT support should be used to support
decisions based on facts, optimization and to automate
labour-intensive processes
• How bottlenecks come about and where investment is
called for
• How to improve layouts and flows to minimize the number
of unnecessary operations and free up floor space for new
production

22. Sixstepstocreatea
productionstrategy
Step 5: Develop the strategy
• How lead times and tied-up capital can be reduced
e.g. by examining set-up times, paced flows, leveling
and introducing a Kanban system
• The feasibility of releasing operators from machines
and pure supervisory tasks so that they can operate
several machines or prepare for the next order.
• How reliability can be improved by expanding
maintenance tasks
However, it is not sufficient to list some
measures. One needs to outline what
must be done, when and what level of
resource will be required for each of the
measures.

23. Sixstepstocreatea
productionstrategy
Step 6: Visualize and confirm the development strategy
Visualize the development strategy so that it is
easy to understand. This can be done using a
gant chart of the most important tasks, creating a
3D image of the new layout and producing
effective presentation material.

24. Implementation
Thestrategyshouldnotbeconsideredtobemerelyadocumentthatisbeingusedtostartsome
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prerequisitestoachievetheobjective,andyougetthewhere-with-alltoplanandreactlong-term.
Yourexpertsupportsyouandthecompanyalongthewaywithtraining,coachingandadvice.