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Operations Strategy

To define an  optimal Operation Strategy that drives production efforts and all resources to achieve the corporate Strategy

Manufacturing strategy refers to exploiting certain properties of the manufacturing function as a competitive weapon (Skinner)

Step 1:  Identify the current Corporate Strategy and Business Plan

Step 2:  Identify the current and future Markets and External Environment

Step 3:  Identify the current and future plant resources and Internal Environment

Step 4: Define Product Plans

Step 5: Define Competitive Priorities

Step 6:  Define Production Optimization Strategy

  1. Positioning Strategy (Flexibility)

  2. Lead Time Strategy (Speed)

  3. Productivity, Cost and Innovation Strategies

  4. Quality Strategy

  5. Aggregate Planning Strategy (Work force & Capacity Options)

  • Product Life Cycle


  • Product Plans' Alternatives

  • Enter Early and Exit Late (From Introduction to Decline )

  • Enter Early and Exit Early (From Introduction to Maturity)

  • Enter Late and Exit Late (From Maturity to Decline)

a. Structure (Design & Creation of the Transformation System)

a.1 Positioning Strategy (flexibility)

Production operations types and resources define its possible dimensions of Flexibility


Flexibility Dimensions


Not Applicable




1. Product Mix Flexibility





2. Changeover Flexibility





3. Modification Flexibility (Customization)





4. Volume Flexibility (Coping with Changes in Demand)





5. Rerouting/Program Flexibility





6. Resource Flexibility





7. Flexibility Responsiveness





8. Delivery Flexibility





The above table helps in defining the optimum positioning strategy

HMLV High Mix Low Volume  Manufacturing  - Product Focused

(Organizing the Productive resources around the Product)

  • Low Volume

  • Wide Variety /High Customization

  • Not as Efficient/ Highly Flexible

  • General Purpose Equipment

  • High Skilled and Highly Trained Workforce

  • Jumbled and Complex Work Flow

HVLM High Volume Low Mix Manufacturing - Process Focused

(Organizing the Productive Resources According to Capability)

  • High Volume

  • Limited variety Products/Services

  • Line Flows

  • Special Purpose Equipment

  • Low Labor Skills

  • Capital intensive/ High Automation

  • Efficient


a.2 Technology and Vertical Integration Strategy

The need for a higher Technology or a sudden increase of demand could be achieved through Vertical Integration: Outsourcing and Long Term Partnership. This will also help in reducing cost and enhancing quality.

a.4 Location Layout - Cellular Manufacturing

Cellular Manufacturing will help in streamlining the product flow with a U Shape Flow, and applying One Piece Flow principles as much as possible.




b.1 Lead Time Strategy (Speed)

Speed often is measured in terms of:

  • Quickness—which is measured by the mean

  • Reliability—which is measured in terms of the range and shape of the lead time distribution

Four Lead Time Strategies (Material Strategies)

Pull Strategy (The Customer Pulls his needs)

  • Engineer to Order ETO:  designed to customer specification

Products whose customer specifications require unique engineering design or significant customization. Each customer order requires a cost estimate, and special pricing. These orders generally result in a unique set of components, bills of material, and production routings

  • Make to Order MTO : Standard design, produced only upon order

A manufacturing process strategy where the trigger to begin manufacture of a product is an actual customer order or release, rather than a market forecast. For Make-to-Order products, more than 20% of the value-added takes place after the receipt of the order or release, and all necessary design and process documentation is available at time of order receipt.

Pull / Push Strategy

  • Assemble to Order ATO: Subassemblies produced, assembled upon order

" A production environment where a product or service can be made after receipt of a customer's order. The end item finished product is generally a combination of standard components and custom designed components that meet the unique needs of a specific customer. Where options or accessories are pre-stocked prior to customer orders, the term assemble-to-order is frequently used."

Push Strategy (the Company pushes its products to the markets)

  • Make to Stock MTS :

finished product made prior to order

"Make to Stock - A production environment where end item products are usually finished before receipt of a customer order. Customer orders are generally filled from finished goods inventories, and production orders are used to replenish finished goods inventories"




Factors affecting the choices between Lead Time Strategies

Product Structure

  • “A” Structure - MTS (Make To Stock)

We have many components that are “assembled” into just a few end items.

  • “V” Structure - MTO/ETO (Make To Order / Engineer To Order)

We have very few inputs that are transformed into a variety of components, which in turn are transformed into a very large variety of end items.

  • “X” Structure Modular - ATO (Assemble To Order)

We have very small amount of modules enable a large amount of end products.

Product Life Cycle


Product Life Stage

Manufacturing Strategy   (Lead Time Strategy)


MTO Make To Order (Pull Strategy)


MTS Make To Stock (Push Strategy)


ATO Assemble To Order (Push /Pull Strategy)


ATO Assemble To Order (Push /Pull Strategy)


b.2 Productivity, Cost and Innovation Strategies

Productivity = Output / Input

  • Partial measures = output/(single input)

  • Multi-factor measures =  output/(multiple inputs)

  • Total measure = output/(total inputs)

Productivity enhancement and Cost Reduction could be achieved through different Strategies

Lean Manufacturing

  • Adopting Lean Manufacturing to eliminate Non-Value Added activities


Typically 95% of all lead time is non-value added

Minimizing Cycle Time Variability

  • Factory Physics shows that Cycle Time Variability will result longer Total Cycle Time. Cycle time reduction could be achieved through reducing the three main sources of Variability

Source of High Variability

Proposed Strategy


Maintenance Strategy based on short intervals between two short planned maintenance  

Setup Time

SMED Applying Single Minute Exchange of Dies


Dynamic Forecasting based MPC Manufacturing Planning & Control Principles

Simulation Techniques

Manpower Productivity

Identifying the learning curve for all the manpower or for a crew of labors or for certain job will help to calculate Manpower productivity. This of course requires historical data in order to the parameters of Learning Curve equation.

Wright's Cumulative Average Model

In Wright's Model, the learning curve function is defined as follows:

                                                 Y = aXb


where:   Y = the cumulative average time per unit.

              X = the cumulative number of units produced.

              a = time required to produce the first unit.

              b = slope of the function when plotted on log-log paper.

Theory of Constraints TOC and Buffer Stock Strategy (See more details)

b.3 Quality Strategy

  • Production Quality could be measured by 4 aspects:

    • Performance

    • Service

    • Reliability

    • Conformance

  • Theses aspects depend mainly on quality control and efforts for prevention of errors. The decision factor is Total Cost of Quality

Total Cost of Quality

Prevention Costs:

  • Quality planning

  • Product design

  • Training

  • Process control

  • Data analysis

  • Reporting

  • Projects

Appraisal Costs

  • Inspection

  • Test

  • Measurement

  • Materials

  • Calibration

Internal Failure Costs

  • Scrap

  • Rework

  • Retest

  • Vendor losses

  • Yield failure losses

External Failure Costs

  • Failure, mfg.

  • Failure, customer returns

The Figure shows that there is an optimum level of conformance which define the Target Total cost of Quality



b.4 Aggregate Planning Strategy (Work force & Capacity Options)

Proactive Strategy: (Demand Management)

Coordinate Marketing & Production plans to Level Demand using the following:

  • Pricing differentiation to shift demand from Peak Periods to off-peak periods  

  • Promotion for shifting demand more closely to capacity level

  • Allowing Back Orders or Advance Order in peak periods  

  • Creating New Demand at  off-peak periods  (counter-cyclical products )

Reactive strategy: Capacity Options: Chase/ Level alternatives

Allow volume forecasts based on Marketing plan to drive production planning using the following:

Chasing Demand

The chase method helps firms match production and demand by hiring and firing workers as necessary to control output.

Level Production

The level method allows for a constant rate of production. Variations in demand are balanced by using:

  • Overtime / Slack Time

  • Part-time workers

  • Finished goods Inventories to cover Peak periods

  • Subcontracting/ Outsourcing

  • Back Orders and/or stock outs

Mixed strategy

  • Combines elements of both an active strategy and a passive (reactive) strategy 

  • Firms will usually use some combination of the two