From the course: Supply Chain and Operations Management Tips
Pick the right production strategy
From the course: Supply Chain and Operations Management Tips
Pick the right production strategy
- Companies that manufacture a product need to balance three goals that'll often conflict with one another: customizing products to meet their customers' needs; filling orders quickly; and keeping costs low. Let's take a look at three different manufacturing strategies that can help you manage these trade offs and find the right balance for your supply chain. We'll use the example of buying a car to show how each of these manufacturing strategies work. Imagine walking into a dealership and looking at one of the cars on the showroom floor. That car's actually inventory or stock that was manufactured using a Make to Stock production strategy. With a Make to Stock strategy, you manufacture products in advance so you have them ready for a customer to buy and you can keep manufacturing costs low and provide customers with short lead times because you're planning ahead. But the drawback is that it's often hard to predict how much your customers are going to buy and when they're going to buy it. As a result you end up carrying inventory which eats up working capital for your business and increases your overall operating costs. Now let's say that you want a car that isn't in the showroom. You want your car to be a red convertible with the luxury package. Instead of carrying every possible configuration for the car in their inventory, the dealer can use a Make to Order production strategy. With a Make to Order strategy, the factory would have all of the parts ready but they wouldn't assemble your specific car until they've received an order, and because they're making that product for a particular customer they can tailor it to their exact preferences. Make to Order reduces the cost of holding on to inventory but it means that your customers will need to wait a little longer. Waiting is bad because sometimes customers need the product right away, so they might decide to buy it from one of your competitors instead. Also, with a Make to Order strategy, it can be harder to plan your production schedule, which could end up increasing your manufacturing costs. Now, let's say that you want some really special modifications to your car, like installing a race car engine. That brings us to the third manufacturing strategy: Engineer to Order. With an Engineer to Order strategy the product is totally customized, so you can't buy the parts in advance and you can't start producing the product until you've received specifications from your customer. An Engineer to Order strategy usually has the longest lead time and the highest cost, but your customer gets exactly the product they need and you don't spend money on inventory. Every manufacturer uses a combination of Make to Stock, Make to Order and Engineer to Order in their supply chain. When you use the right production strategy to manage the trade offs in time, cost and customization, you can design a supply chain that aligns with your customers' needs and maximizes the profitability for your operations.
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Contents
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Welcome to the course2m 32s
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Focus on supply chain management4m
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Adopt strategic sourcing3m 59s
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Avoid inventory stockouts3m 12s
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Become a sustainability champion4m 10s
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Connect distribution center processes3m 41s
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Drive continuous process improvement4m 19s
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Embrace omni-channel fulfillment3m 46s
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Analyze your supply chain risks3m 32s
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Prepare your business continuity plan3m 11s
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Strengthen supply chain cybersecurity4m 11s
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Track and trace your products3m 58s
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Improve your sales forecast3m 29s
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Use sales and operations planning (S&OP)3m 32s
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Invest in innovation3m 23s
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Lead cross-functional projects2m 55s
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Calculate payback period and NPV3m 29s
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Manage transportation decisions3m 41s
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Analyze the impact of lead times2m 44s
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Develop operations management skills4m 24s
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Tips to reduce waste in your operations4m 9s
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Calculate return on investment3m 38s
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Prevent counterfeiting3m 54s
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Manage employee turnover3m 55s
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Pick the right production strategy3m 25s
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Adopt strategic workforce planning3m 17s
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Optimize your inventory3m 33s
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Manage payment terms and cash flow2m 47s
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Learn about MRP and ERP planning systems3m 30s
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Use big data for operations management2m 54s
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Optimize your perishable inventory3m 22s
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Track your inventory turns2m 34s
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Manage change and transitions3m
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Blockchain for supply chain3m 7s
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Choose meaningful metrics and KPIs3m 25s
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Build flexibility into your supply chain2m 45s
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Automate your supply chain3m 9s
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Optimize your lot sizes3m 1s
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Manage customer returns3m 19s
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Build a career in supply chain operations management2m 51s
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Ten industries for supply chain operations managers2m 49s
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Recruit top talent successfully2m 52s
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Solve problems as a team2m 15s
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Beware of the bullwhip effect2m 55s
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Make your professional development plan2m 56s
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Adopt formal purchasing ethics3m 21s
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Learn about supplier relationship management (SRM)3m 2s
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Use analytics for supply chain3m 32s
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Learn about customer relationship management (CRM)2m 50s
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Learn about warehouse management systems (WMSs)3m 9s
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Learn about transportation management systems (TMSs)2m 49s
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