How to develop a winning Manufacturing Footprint Strategy
- Marc Rieke
- Jan 8, 2024
- 10 min read
Working on improving or re-designing the production footprint of your company? A critical evaluation and possible refinement of the overarching production network strategy should always be your starting point. This step should not just be a preliminary measure; it's the cornerstone of any endeavor aimed at transforming and enhancing the manufacturing footprint.
From our extensive experience in the field, we've observed a common oversight especially in operational functions – the underestimation of the importance of routinely reviewing and enhancing the production strategy and the deriving footprint strategy. Decisions made within the operations sphere are not only capital-intensive, but also often the most challenging to reverse. Consider, for instance, the establishment of a new plant; such a decision is monumental and not easily undone.
Thus, in our client project work, we consistently emphasize the significance of a robust understanding of the underlying production footprint strategy before discussing any concrete measures on the footprint: Whether working on the inception of new factories, reconfiguration of existing facilities, or other adaptations in the value chain – the foundational production footprint strategy is one of the major cornerstones. This strategic approach ensures that every decision made is aligned with the broader goals of the organization, resulting in a more cohesive and effective manufacturing operation.
Understanding the intricate tapestry woven by the corporate strategy, the competitive landscape, the specific market demands, and the existing array of resources and organizational structures is key. It's this unique combination of elements that guides the creation of a manufacturing strategy truly tailored to your company’s needs. However, the journey towards an optimal production footprint design is as unique as the companies that embark on it. There's no universal blueprint or "one size fits all" solution in the realm of manufacturing footprint design.
In the following chapters, we delve deeper into the nuances of developing a winning manufacturing footprint strategy, exploring its various facets and illustrating its implementation through real-world examples. Our goal is to arm you with the insights and tools necessary to make informed, strategic decisions that will give you first impulses on how to improve your production footprint strategy.
Table of content
Starting Point: Corporate Strategy
Aligning Corporate Vision with Manufacturing Excellence
The journey to a successful manufacturing footprint strategy invariably begins with the overarching corporate strategy. This foundational aspect often reveals a stark reality in our client project experience: The alignment between the corporate strategy and the operative production strategy is a surprisingly rare occurrence. Yet, this alignment is not just beneficial; it's crucial for long-term success and would otherwise totally undermine the corporate strategy.
Evaluating Market Dynamics and Company Assets
A thorough analysis of the market environment, including clients and competitors, combined with a deep understanding of the company's current setup – assets, production sites, product portfolio, etc. – lays the groundwork for tailoring the production footprint strategy. This strategy must dovetail with the company's differential or key strategic success factors (SSFs), which are vital for its success. For instance, a company's focus on cost leadership will directly influence the required capabilities of its production footprint. The priority here is to comprehend these priorities, as they set the framework for the entire production footprint strategy.
Critical Success Factors: A Deeper Dive
The concept of SSFs (strategic success factors) is central to this process. These SSFs are broken down into the capabilities necessary for their realization. Initially, these prerequisites should be identified independently of the company's specific abilities, focusing on the competitive environment. The next step involves determining the capabilities required to actually occupy these strategic positions and assessing which competitors might already be better positioned or even occupying these SSFs.
This analysis allows a company to estimate the effort needed to develop these SSFs and address the associated strategic options effectively. It also leads to well-informed decisions regarding resource allocation. A competitive advantage is particularly evident when existing strengths can be leveraged to occupy these strategic positions.
Evaluating Strategy Options: Internal and External Perspectives
The final step involves evaluating various strategy options from both internal and external perspectives. This evaluation includes considering the existing capabilities or the effort required to develop new ones. The criteria used in this evaluation should always reflect the specifics of the company and its environment, rather than being universally applied. The outcome of this evaluation is a prioritized strategy option tailored to the company's needs.
Post this strategic determination, one can revisit the SSFs, further classifying them as "market-qualifying" or "order-winning".
It's important to note that these strategic clarification steps must be customized based on the specific situation of the company. The key is to first understand the "strategic question" at hand. Based on this understanding, appropriate analysis steps can be formulated. However, a common thread in most scenarios is the evaluation of market opportunities in combination with the necessary competencies and capacities.
This chapter highlights that understanding and aligning with the corporate strategy is not just a preliminary step in developing a manufacturing footprint strategy; it's a pivotal process that requires a careful blend of market insight and introspection into the company's core competencies. As we move forward, we'll delve into how this understanding is translated into a concrete production strategy, laying the foundation for a robust and responsive manufacturing footprint.
Developing a Fine-Tuned Production Strategy
When embarking on the journey to fine-tune a production strategy, understanding that it is a critical subset of the broader corporate strategy is paramount. This strategy is not just a guideline; it’s a driving force that ensures a company's competitiveness and distinctiveness in the market. The development of a production strategy is about more than just operational decisions; it's about carving out a unique identity in a competitive landscape.
Embracing the Differentiation Factors
The core of any production strategy lies in its differentiation factors. These factors include cost, quality, delivery capability, flexibility, innovation, and service. Each of these elements plays a vital role in determining the strategic focus and, consequently, the production goals. While a company certainly cannot excel in all these areas simultaneously due to inherent trade-offs, modern research into hybrid production strategies suggests that successful companies aim for a combination of these factors, rather than limiting themselves to one or two. This approach involves a nuanced evaluation of each factor's significance for the company and their potential as differentiators in the market.
Image: Key differentiation factors for production strategy development
Market Qualifiers and Order Winners
A practical approach to assessing these factors is to categorizes them as either unimportant, market qualifying, or order winning. Market qualifiers are essential elements that a company must meet to be considered by potential customers. These could be industry certifications or specific price points. It's crucial to meet these qualifiers to avoid losing out to competitors, but surpassing them doesn't necessarily increase sales.
In contrast, order winners are the factors where a company can distinctly outshine its competitors, influencing customer purchasing decisions. These are the aspects where a company should strive to excel beyond its competitors to secure business.
Systematic Approach to Evaluating Differentiation Factors
To effectively evaluate these factors, a systematic approach is recommended. Each factor is rated on a scale from unimportant, through market qualifier and critical market qualifier, to order winner. Order winners are further weighted from 1 to 100 percent to categorize them as low, high, or highest priority. This prioritization helps in focusing the strategy formulation on the most impactful differentiating factors.
Translating Differentiation into Site Capabilities
The differentiation factors are underpinned by strategic network and site capabilities, which are essential for executing the defined production strategy. Traditionally, the focus has been on site capabilities as the primary lever for implementing production strategies. These capabilities include cost control, quality consistency, delivery speed and reliability, design flexibility, responsiveness to order quantity changes, and innovation.
In summary, developing a production strategy involves a careful analysis of market needs and company strengths, leading to a focus on specific differentiation factors. This focus ensures that production sites are aligned with the strategic goals, ultimately contributing to a competitive and efficient manufacturing footprint.
Engaging and Approachable: The Heart of Strategy Development
In this chapter, we have unpacked the essence of developing a production strategy that aligns with your corporate goals and sets you apart in the market. The emphasis on differentiating factors and their systematic evaluation provides a clear path to not only meet market expectations but to exceed them, securing a competitive advantage in the ever-evolving manufacturing landscape. As we progress, we will explore how these strategic insights translate into a cohesive and dynamic production network.
Adding the Network Component
Integrating Global Network Capabilities into the Production Strategy
As companies are more dependent on global production networks in today's globalized world, the impact of network-level considerations on production strategy has gained significant attention. The strategic network can offer a firm access to vital information, resources, markets, and technologies. It can provide advantages from learning, scale, and scope economies, and enable firms to achieve strategic objectives like risk sharing and outsourcing of value-chain stages and organizational functions.
Five Pillars of Strategic Network Capabilities
Market Access: This includes access to markets and customers, competitors, sociopolitical factors, and image factors. Market access is critical in positioning a company in its desired markets and ensuring visibility to the right audience.
Resource Access: This involves access to suppliers and raw materials, skilled workforce, cost-effective labor, and external knowledge sources. Effective resource management is key to maintaining a competitive edge.
Cost-effectiveness and Efficiency: Achieving economies of scale and scope, and avoiding redundancies, are essential for operating a cost-effective and efficient production network.
Mobility: This covers the mobility of products, processes, and personnel, as well as production volumes. Mobility ensures that the production network can adapt quickly to changing market demands and logistical challenges.
Learning: Both external and internal learning are vital for a company to innovate and stay ahead of market trends and technological advancements.
Balancing Conflicts within Network Capabilities
There are inherent conflicts or trade-offs between these network capabilities. For example, the trade-off between market proximity with locally situated productions and efficiency gains from consolidating production at a few global sites. These conflicts must be resolved in alignment with the strategic capabilities at the site level.
Connecting Site and Network Capabilities
There are significant dependencies between site and network capabilities, impacting production strategy differentiation factors. A Site-Network Capabilities Matrix visualizes these relationships, showing that competitive advantages or disadvantages at the site level can be offset or even overcompensated at the network level, and vice versa. This calls for an integrated process to combine both levels in decision-making.
Linking Network Capabilities with Idealized Network Types
Research has connected network capabilities with idealized network types, identifying four generic types: the cost-competitive global organization, the flexibility-oriented multinational organization, the innovation and knowledge-focused international organization, and the transnational organization, which is a blend of all these aspects.
Summary: The Dual Focus of Network Management
In summary, network management should address both the typical market differentiation factors of the production strategy and the network capabilities discussed above. This is particularly crucial when aiming for network-wide optimizations to utilize the full potential of the network.
This chapter underscores the importance of integrating network considerations into the production strategy. It highlights that a comprehensive approach, considering both site-specific and network-wide capabilities, is essential for developing a robust and competitive manufacturing footprint. As we delve into the subsequent chapters and case studies, we'll explore how this integration can be effectively achieved to optimize production networks and capitalize on global opportunities.
Common Manufacturing Footprint Strategy Blueprints
Crafting Distinctive Production and Network Strategies
This chapter delves into typical blueprints for formulating both market-oriented production strategies and internally capability-focused network strategy blueprints. These frameworks provide a guide for companies to develop strategies that best align with their unique needs and market positions.
Production Strategy
Production strategies encompass a variety of classifications. Summarizing these, we can identify four fundamental strategies:
Price-Oriented Strategy (Price Fighters): Here, companies differentiate primarily through an excellent price-quality level. This strategy, also known as the Price Fighter, focuses on delivering value to the customer at the most competitive price.
Market-Oriented Strategy (Customer Kings): This strategy puts customer needs at the forefront. Companies with this strategy offer a wide range of products, customized designs, and optimal service. Price and quality are also tailored to meet market standards.
Capability-Oriented Strategy (Classic Producers): Companies adopting this strategy differentiate through the perfection of their own capabilities. Continuous improvements and innovative solutions in product quality, delivery reliability, and order quantity flexibility are key. Customer-focused innovations and services are additional characteristics.
Technology-Oriented Strategy (Innovators): Companies pursuing this strategy aim for technology leadership in their field. Primary order winners are product innovations and the highest quality standards, complemented by a well-coordinated product range and services.
The classification of production strategies into one of these four categories depends on the combination of differentiation factors, with a focus on primary and secondary order winners.
Network Strategy
Network strategy is defined through the strategic capabilities that the network must provide. Many companies face challenges in explicitly formulating their network strategies and understanding the strategic capabilities a production network can offer, often leading to unfocused strategies.
In our consulting practice, we typically find one of these four ideal-typical network strategies:
Market: This strategy prioritizes market access, aiming for presence in all relevant markets with local adaptations and customer proximity.
Competence & Resources: Focuses on utilizing global resource heterogeneity. Access to cost advantages, specific competencies, suppliers, raw materials, and skilled labor is key.
Efficiency: Targets achieving scale and synergy effects, maximizing resource benefits.
Innovation: Emphasizes leveraging technological advancements and learning across the network.
In conclusion, the choice of production and network strategies should be a thoughtful decision, aligning with the company's overarching goals and market position. These blueprints serve as a starting point for companies to develop a strategic approach that leverages their unique strengths and positions them effectively in the competitive landscape.
Conclusion
Forging Ahead: Empowering Your Manufacturing Future
As we conclude this exploration of developing a winning manufacturing footprint strategy, it’s evident that the journey is multifaceted and dynamic. From aligning with corporate objectives, embracing differentiated strategies, to integrating network components, each step is crucial in carving out a competitive edge in the global manufacturing arena.
The journey, however, does not end here. The real challenge and opportunity lie in applying these insights and strategies to your unique situation. Every manufacturing landscape is different, and the true test of these principles is in their tailored application to your specific corporate context and market dynamics.
We Are Here to Guide You
At Production Footprint Strategy Consultants, we understand the complexities and challenges of developing and implementing effective manufacturing footprint strategies. Our team of experts is equipped with the knowledge, experience, and tools to guide you through this journey. Whether you’re looking to assess your current footprint, develop a new strategy, or refine an existing one, we are here to help.
Let's Discuss Your Manufacturing Strategy
Take the first step towards transforming your manufacturing footprint. Contact us today to discuss your specific needs and how we can support you in developing a winning strategy. Together, we can turn these insights into actionable plans that drive success and growth for your business.
