A State-Of-The-Art Process For Manufacturing Strategy Formulation

CRANFIELD UNIVERSITY
Jrn Asmussen
A state-of-the-art Process for Manufacturing Strategy Formulation
SCHOOL OF APPLIED SCIENCES
MSc THESIS
CRANFIELD UNIVERSITY
SCHOOL OF APPLIED SCIENCES
MSc THESIS
ACADEMIC YEAR 2006/2007
Jrn Asmussen
A state-of-the-art Process for Manufacturing Strategy Formulation
SUPERVISOR:
Prof Dr Tim Baines
SEPTEMBER 2007
This thesis is submitted in partial fulfilment of the requirements

for the Degree of Master of Science
Cranfield University 2007. All rights reserved. No part of this publication may
be reproduced without the written permission of the copyright holder.
Abstract
Competitive advantage has always been the prerequisite to survive in the
market. However, globalisation expands the arena of competition in the way
that competitive advantage in comparison to any competitor in the world is
required. Manufacturing strategy formulation aims to define the programme that
is necessary to achieve or maintain this competitive advantage with regard to
the manufacturing function.
Ellson (2002) has shown that existing formulation processes are too long and
lack usability and utility. Thus, the aim of this thesis is to create a state-of-theart process for manufacturing strategy formulation.
In the literature review, the evolution and shortcomings of the existing
processes have been identified. The research programme has been manifested
in three steps. First, the theoretical basis for manufacturing strategy formulation
has been established. In a second step, a new process for the formulation has
been developed, which has been applied and tested in one industry example in
the third step.
The developed process is based on a framework for strategy formulation that
follows a sequence of steps, which has been applied in different research
areas. The process content uses tools from manufacturing strategy formulation
processes and other strategy related fields. The tools are selected due to three
criteria to compose an effective process: their ability to be used in workshops,
the ease of use and the expected results. Thus, a short process has been
created that aims to define actions that are in line with the direction of the
company.
The application of the process in one business unit has proven that the process
is very effective, as it allows formulating a manufacturing strategy within a short
period. However, the process still needs to be tested in different companies to
get further feedback and to optimise it incrementally.
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Acknowledgements
First, I would like to thank my supervisor, Prof Dr Tim Baines, for his support
and his valuable input. I also appreciated the valuable discussions I had with
Veronica Granell.
For the opportunity to apply the process, I would like to thank Dieter Kreuzberg,
Michael Solle, Thorsten Hrdina and Niels Bhmer. Furthermore, I would like to
thank my family, Volker Berkhout and especially Britta Grnjes for her support
and encouragement during this period.
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Abstract ............................................................................................................... i
Acknowledgements .............................................................................................ii
List of Figures..................................................................................................... v
List of Tables ......................................................................................................vi
Glossary of Terms ............................................................................................. vii
1
Introduction ................................................................................................. 1
1.1
Background.......................................................................................... 1
1.2
Thesis Aim and Objectives................................................................... 2
1.3
Thesis Structure ................................................................................... 2
Literature Review ........................................................................................ 4

2.1
2.1.1
Strategic Management as a Hierarchical Process ........................ 5
2.1.2
Schools of Strategy....................................................................... 6
2.2
Manufacturing Strategy ........................................................................ 7
2.2.1
History and Definition of Manufacturing Strategy .......................... 7
2.2.2
Content and Process for Manufacturing Strategy ......................... 8
2.3
3
Strategic Management ......................................................................... 4
Chapter Summary .............................................................................. 12
Research Aim, Objectives and Programme .............................................. 13

3.1
Research Problem ............................................................................. 13
3.2
Aim and Objectives ............................................................................ 13
3.3
Research Programme ........................................................................ 14
Formation of the Theoretical Basis............................................................ 16

4.1
Methodology ...................................................................................... 16
4.2
A Framework for Manufacturing Strategy Formulation....................... 17
4.3
Steps, Tools and Techniques for Strategy Formulation ..................... 18
4.3.1
Tools and Techniques for the Analysis Stage ............................. 18
4.3.2
Strategic Direction Setting .......................................................... 26
4.3.3
Tools and Techniques for Uncovering Alternatives..................... 27
4.3.4
Tools and Techniques for Evaluating Alternatives ...................... 29
4.3.5
Tools and Techniques to Guide the Implementation................... 30
4.3.6
Summary of Tools and Techniques ............................................ 31
4.4
Further aspects regarding the Application of the Process.................. 32
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4.5
5
Formation of the Manufacturing Strategy Formulation Process ................ 35

5.1
Method for the Development of the Formulation Process .................. 35
5.1.1
Development of an Operational Framework ............................... 35
5.1.2
Evaluation of the Existing Tools and Techniques........................ 36
5.1.3
Composition of the Process ........................................................ 36
5.2
The Operational Framework .............................................................. 37
5.3
Evaluation of the Tools and Techniques ............................................ 39
5.4
A Process for Manufacturing Strategy Formulation............................ 41
5.4.1
Inputs for the Process ................................................................. 41
5.4.2
Stage 1: Analysis ........................................................................ 42
5.4.3
Stage 2: Direction Setting ........................................................... 44
5.4.4
Stage 3: Manufacturing Objectives ............................................. 46
5.4.5
Stage 4: Manufacturing Initiatives ............................................... 46
5.4.6
Stage 5: Manufacturing Policy Deployment ................................ 49
5.5
6
Chapter Summary .............................................................................. 33
Chapter Summary .............................................................................. 50
Testing the Formulation Process............................................................... 51

6.1
Methodology ...................................................................................... 51
6.2
Application of the Process.................................................................. 51
6.2.1
The Company ............................................................................. 51
6.2.2
Conduction of the Process.......................................................... 52
6.3
Results of the Evaluation ................................................................... 54
6.4
Discussion of the Case Study ............................................................ 55
6.5
Chapter Summary .............................................................................. 56
Conclusion, Limitations and Future Research........................................... 57
References................................................................................................ 59
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List of Figures
Figure 1 - Thesis structure.................................................................................. 2
Figure 2 - A framework for the strategy process................................................. 5
Figure 3 - Definition of strategy levels ................................................................ 6
Figure 4 - Different schools of strategy............................................................... 7
Figure 5 - Levels of strategic analysis .............................................................. 19
Figure 6 - Different approaches to industry analysis ........................................ 20
Figure 7 - Different approaches to company-level analysis.............................. 22
Figure 8 - The operational framework .............................................................. 38
Figure 9 - Overview of the manufacturing strategy formulation process........... 42
Figure 10 - Competitive gap analysis ............................................................... 52
Figure 11 - Selection and weighting of FACTO criteria .................................... 53
Figure 12 - The structured cognitive map......................................................... 53
Figure 13 - Ranking of selected initiatives ........................................................ 54
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List of Tables
Table 1 - Manufacturing decision areas ........................................................... 10
Table 2 - Example of the evaluation scheme.................................................... 41
Table 3 - Evaluation of the application ............................................................. 55
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Glossary of Terms
BCG
DIHK
Boston Consulting Group

Deutsche Industrie- und Handelskammer (German Chamber of
Commerce and Industry)
KPI
Key Performance Indicator
QFD
Quality Function Deployment
PDM
Policy Deployment Matrix
PEST
Political, Economic, Social and Technical
SWOT
Strengths, Weaknesses, Opportunities and Threats
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Introduction
1 Introduction
This chapter provides a brief description of the background of the thesis.
Furthermore, it presents the aim and objectives as well as the structure of the
work.
1.1 Background
In 2008, China will overtake Germany as the country with the highest exports
with an export volume of more than 1 trillion (DIHK, 2007). Trade agreements
and the opening of the eastern world have led to increased global competition,
especially for the manufacturing industry. The ability to transfer money to any
place in the world without barriers allows firms to manufacture products in the
region where a company finds the best conditions for its requirements. This
means on the one hand that western companies or even plants within a
company are in cost competition with plants in China, India, Russia, Brazil and
anywhere in the world, but also that on the other hand for example chinese
plants compete with local and international plants in terms of quality. In this
complex world, a company needs competitive advantage in order to stay in the
market. As already stated by Hayes and Wheelwright (1984), manufacturing
can be a formidable weapon for this competition. Without a focused strategy,
companies tend to make short-term decisions that are in contrast to their longterm goals (Menda and Dilts, 1997). This problem is aggravated by the
complexity that is created by the amount of different improvement programmes
and technologies that are available in the market.
Manufacturing strategy aims to create competitive advantage and to identify the
necessary improvements for the manufacturing function of one specific
company for its current unique situation and future aspirations. The
manufacturing strategy formulation process defines which steps have to be
undertaken in order to get from the situation to the solutions and actions.
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Introduction
1.2 Thesis Aim and Objectives

The aim of the thesis is to develop a state-of-the-art process for manufacturing
strategy formulation (section 3.2). In order to meet this aim, the following
objectives have been established (section 3.3):
(1) Identify a framework for strategy formulation
(2) Establish an adequate process including the tools and techniques to
formulate a manufacturing strategy
(3) Test the manufacturing strategy formulation process
1.3 Thesis Structure

The thesis structure can be divided into the research problem, the research
programme and the conclusion (Figure 1). The research problem will form the
beginning of the thesis, starting with a literature review on strategy and
manufacturing strategy where the central concepts will be defined. The
development of manufacturing strategy and limitations of the existing
formulation processes will be presented (section 2).
Literature Review
Research Aim, Objectives and
Programme
Formation of the Theoretical Basis
Formation of the Manufacturing

Strategy Formulation Process
Testing of the Process
Conclusion, Limitations and Future
Research
Figure 1 - Thesis structure
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Introduction
In the second chapter concerning the research problem, the research aim and
objectives will be provided, building upon the literature review, and an outline of
the research programme will be given (section 3).
The research programme is divided into the following three stages: The first
stage is the formation of the theoretical basis (section 4). Based on another
literature review, a framework for strategy formulation will be established.
Furthermore, the tools and techniques of existing processes and frameworks for
manufacturing strategy formulation will be presented. Finally, aspects regarding
the application of the process within the company will be outlined. The second
stage deals with the formation of the manufacturing strategy formulation
process (section 5). Using the information of section 4 and the results of the
literature review in section 2, an operationalised process for manufacturing
strategy formulation will be developed and presented. In the final stage of the
research programme, the process will be tested (section 6). It will be applied in
a manufacturing company to get immediate, significant feedback. Finally, the
thesis will draw conclusions (section 7).
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Literature Review
2 Literature Review
This section provides a brief overview of the evolution of strategic management
(section 2.1) and manufacturing strategy (section 2.2). Definitions for the basic
terms are given. Within section 2.2, the development of the content and process
of manufacturing strategy will be presented and the limitations of present
processes will be pointed out.
2.1 Strategic Management

The origin of strategy and its literature can be found in the field of military. The
Art of War, written by Sun Tzu around 500 B.C., can be seen as the first book
on military strategy. This book, as well as the first modern book, Clausewitzs
On War (2004, first published in 1832), had major impact on the development
of strategic management.
In the field of management, the topic of strategy first came up in the 1960s with
the publications of Chandler (1962) and Ansoff (1965). During the last 45 years,
various schools (section 2.1.2) have come up with different views on strategy
and different definitions, so that no single, accepted definition has been
manifested. Chandler (1962) defined strategy as [] the determination of basic
long term goals and objectives of an enterprise, and the adoption of courses of
actions and the allocation of resources necessary for carrying out these goals.
In this thesis, the definition of Quinn (1980) will be used, who refers to strategy
as a [] pattern or plan that integrates an organisations major goals, policies
and action sequences into a cohesive whole.
Strategy in general can be divided into the stages of strategy formulation and
strategy formation (Mintzberg et al., 1995). Formulated strategies, due to
Mintzberg, are the deliberate strategies, whereas strategy formation reflects
the view on strategy as a pattern of actions that additionally consists of
emergent strategies. Another distinction is the one between strategy content
and process (Pettigrew et al., 2004), which regards the content as the what
and the process as the how. Chakravarthy et al. (2004) developed a
framework for the strategy process (Figure 2) that reflects the concept of
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Literature Review
strategy as a dynamic process. In this framework, the actions and decisions

form the core elements of the strategy and determine the companys
performance. The performance forms a feedback loop to the core elements and
influences the company context.
Figure 2 - A framework for the strategy process

(See: Chakravarthy, Balaji S.; White, Roderick E., 2004)
A mutual interaction describes the relationship between the core elements and
the company context. The environment, consisting of the global environment,
the industry environment and the customers, is the dynamic factor that changes
the company. Thus, the strategy process is driven by the environment.
However, the decisions and actions are the elements that shape the company
and its performance.
2.1.1 Strategic Management as a Hierarchical Process

Academics and practitioners in the field of strategy have manifested a
hierarchical strategy process within business organisations. Hofer and Schendel
(1978) as well as Wheelwright (1984b) defined three levels of strategy for multibusiness corporations (Figure 3): corporate strategy, business strategy and
functional strategies. In a single business company, corporate and business
strategy are identical (Grant, 2002). Mills et al. (1998) explain that also site
strategies may be present in some multinational companies.
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Literature Review
1. Corporate Strategy
Selecting the business in which the firm will participate
Acquiring and allocating resources among the selected businesses
to create value for the firms publics
2. Business Strategy
Clarifying the boundaries of the business to be served
Selecting the desired competitive advantage to be pursued
3. Functional Strategy
Determining the basis on which the function will support the desired
competitive advantage
Integrating and coordinating the function with other functions to
which it interfaces
Source: Wheelwright (1984b), Strategy, Management, and strategic planning approaches
Figure 3 - Definition of strategy levels
2.1.2 Schools of Strategy

During the last four decades, various views on strategy have evolved. Figure 4
provides an overview of a selection of different classifications. Mintzberg et al.
(1998) identified ten different schools. Hart (1992) specified five different modes
of strategy making. Chakravarthy et al. (2004) collapsed these schools into four
perspectives: rational, political, evolutionary and administrative. Furthermore,
the resource-based view, which has gained popularity throughout the last
decade, can be added to the list of schools and has been reflected by
McKiernans four schools (prescriptive, emergent, competitive positioning, core
competence/resource or knowledge based, 1997).
This already indicates the fact that no unified theory has yet been established
that incorporates the different views on strategy and is widely accepted by
academics.
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Literature Review
Figure 4 - Different schools of strategy
2.2 Manufacturing Strategy

The strategic importance of manufacturing as a function in the company has
been recognised already in 1969 by Wickham Skinner. The evolution of
manufacturing strategy will be covered in this section. An overview of the
existing literature on manufacturing strategy will be given, starting with a brief
history of the field, followed by a framework of manufacturing strategy divided
into content and process.
2.2.1 History and Definition of Manufacturing Strategy

With the groundbreaking work Manufacturing missing link in corporate
strategy, the foundation of manufacturing strategy was formed by Skinner in
1969. He states that companies have to align marketing and manufacturing
strategies and incorporate them into the corporate level. Otherwise, they may
become saddled with seriously noncompetitive production systems.
As in business strategy, there is no unified definition for manufacturing strategy.
Swamidass and Newell (1987) confirm Skinners view as they define
manufacturing strategy as the effective use of manufacturing strengths as a
competitive weapon for the achievement of business and corporate goals.
Wheelwright (1984a) defines manufacturing strategy in his work Manufacturing
strategy defining the missing link as a consistent pattern of decisions in
major areas of manufacturing operations. In this work, the definition of Platts et
al. (1990) will be used. They combined these two views and defined
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Literature Review
manufacturing strategy as a pattern of decisions, both structural and

infrastructural, which determine the capability of a manufacturing system and
specify how it will operate in order to meet a set of manufacturing objectives
and which are consistent with the overall business objectives.
Fine and Hax (1985) developed with their paper Manufacturing strategy: A
Methodology and an Illustration the first prescriptive process for manufacturing
strategy formulation, where they practically defined how manufacturing strategy
can be formulated. Within the last 25 years, numerous articles and books have
been published on this field, with a focus on the content of manufacturing
strategy. Anderson et al. (1989) and Dangayach and Deshmukh (2001) provide
overviews of the existing literature. Although researchers have now been
focusing for more than three decades on the topic, it is still under considerable
development and debate (Jalham et al., 2006).
2.2.2 Content and Process for Manufacturing Strategy

Strategy in general can be divided into the two areas of content and process
(Pettigrew, 1992). This division will also be kept for this section; an overview
about the content related literature will be given first before the process related
one will be presented.
Content
In their review of 290 papers published on manufacturing strategy, Dangayach
and Deshmukh (2001) identified that the content related literature is by far the
most frequent one with 237 of these papers. The content related literature can
be classified into the three fields of i) competing through manufacturing, ii)
strategic choice and iii) best practices (Voss 1995, 2005). This classification will
also be applied for this section.
Due to Voss (2005), competing through manufacturing means that a firm
should align its capabilities with the key success factors, its corporate and
marketing strategies and the demands of the marketplace. Wheelwright and
Hayes (1984) four stage model of the manufacturing role within the company
forms the foundation of this paradigm. Hill (1993) formulated a very practical
approach with his concept of order-winning and order-qualifying criteria. Using
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Literature Review
the market as the driver for the manufacturing strategy has been acknowledged
by Platts and Gregory (1990) and recently by Meybodi (2006) in their
manufacturing audit approaches. Competitive priorities like cost, quality,
delivery and flexibility have been established in order define the market needs.
Berry (1992, 1999) as well as Menda and Dilts (1997) see the alignment of
manufacturing and marketing as the main goal for a successful manufacturing
strategy. Internal resources and capabilities as drivers for the strategy have
been used by Schroeder et al. (2002) and Bourne et al. (2003), whereas Tan
and Platts (2005) used the integrated approach of a combination of market
requirements and core competencies. As the manufacturing area is developing,
service has become a field of competition for some manufacturers (Slack et al.,
2004) and has to be reflected by the manufacturing strategy.
The second category, strategic choices, deals with the areas of decisions that
form manufacturing strategy. Skinner (1969, 1974), Wheelwright and Hayes
(1984) and Hill (1993) all proposed similar areas (Table 1) that are mainly
divided into structural and infrastructural. These areas are similar to the
propositions offered by Buffa (1984) and Fine and Hax (1985). A variety of
works have treated one single choice or a selection of these choices and the
impact of it on manufacturing strategy (e.g. Grler, 2007; Hayes, Upton and
Wheelwright, 2006 and 1996; Sfsten and Winroth, 2002; Mechler et al., 1995;
Leong et al., 1995; Berry, 1992; Voss, 1986; Skinner, 1974).
The third aspect, best practice solutions, has evolved since the Japanese
manufacturing companies like Toyota or Honda have performed significantly
better in the worldwide markets than its western competitors. One focus within
the field of best practice was the term of world class manufacturing that has
been proclaimed by Wheelwright and Hayes (1984) and has been analysed by
Flynn et al. (1999). A variety of best practice solutions and different concepts
has been developed during the last years and has been applied in practice.
Sousa and Voss (2001) found that best practices could be divided into two
different classes based on the context: the ones that can be applied
independently and those that just work under certain circumstances.
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Literature Review
Despite the recognition of manufacturing strategy, Ward et al. (1996) remarked

that research in this field lags behind business strategy and corporate strategy
with an increasing gap. Brown and Blackmon underlined this statement in 2005
with special reference to the market-led and resource-driven approaches. This
gap has partly been closed by the recent works of Bourne et al. (2003), Pun
(2004) or Brown and Blackmon (2005).
Table 1 - Manufacturing decision areas
Process
Maslen and Platts (1997) define the manufacturing strategy process broadly as
one that describes or prescribes a way by which a manufacturing organisation
creates a strategy. Kim and Arnold (1996) provide a more specific definition: on
a macro-level, the process defines how manufacturing strategy is linked to
corporate strategy and to other functional strategies. On a micro-level, the
process defines the means for achieving competitive advantage (Kim and
Arnold, 1996; Vickery et al., 1993).
Although Adam and Swamidass (1989) attached equal importance to the
process and to the content of manufacturing strategy, the number of
publications concerning the process is still significantly lower than for literature
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Literature Review
concerning the content (Dangayach and Deshmukh, 2001). The contributions

range from descriptive works on the process to prescriptive works for the
formation and formulation of a manufacturing strategy. Nielsen-Englyst (2003)
and Swamidass et al. (2001) analysed the manufacturing strategy process as a
formation process. The publications about formulation processes deal with
frameworks or descriptions of overall processes (Anderson et al., 1991) and
operationalised processes (Menda and Dilts, 1997). A framework in this case is
a conceptual structure, which describes the main ideas of how to create a
manufacturing strategy. It can adumbrate the steps to formulate the
manufacturing strategy but does not provide the defined tools and clear
recommendations for a practical application. An operationalised process
provides the steps and the tools for each of the steps; it might even include
necessary worksheets. Some of the models even describe how the process has
to be embedded into the organisation. The transitions between definitions are
smooth, which sometimes makes the classification of processes difficult.
Although Skinner (1969) and Wheelwright and Hayes (1979) already provided
frameworks for the process of manufacturing strategy formulation, the first
operationalised process was developed by Fine and Hax (1985). A variety of
processes has emerged since. Some of the works focused on the macro-level
on the alignment between the strategies (Menda and Dilts, 1997; Berry, 1999),
whereas others focused on the micro-level to define the means to achieve
competitive advantage by manufacturing (Platts and Gregory, 1990; Samson,
1991; Greehalgh, 1991). Especially researchers of the University of Cambridge
shaped the field of prescriptive manufacturing strategy formulation processes
with various publications (dti, 1988; Platts and Gregory, 1990; Mills, Platts and
Gregory, 1995; Mills et al., 1996; Tan and Platts, 2005). Another stream applied
QFD as the underlying method for the formulation process (Crowe and Cheng,
1996; Jalham et al., 2006). The majority of the process related literature
suggests top-down planning methodologies (e.g. Skinner, 1969; Platts and
Gregory, 1990; Miltenburg, 1995).
In 1996, Crowe and Cheng stated that the existing processes had hardly been
applied by companies because they lacked practicability. Ellsons (2002)
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Literature Review
research proved a significant level of interest in manufacturing strategy

formulation by practitioners. He further stated that existing processes lacked
usability and usefulness and were recognised as too long. Brown and Blackmon
(2005) found the reason for the low level of application in the delay of content
research for manufacturing strategy in comparison to business strategy. Tan
and Platts (2003) furthermore remarked that current processes focused too
much on objectives and did not lead directly to actions.
2.3 Chapter Summary

This section has shown that although strategy has been subject to research in
management and manufacturing for decades, clear, broadly accepted
definitions for these terms have not been manifested.
Regarding the relationship between business strategy and manufacturing
strategy, present literature acknowledges the dependence of the areas, but
manufacturing strategy is still lagging behind in research. Recent frameworks
try to provide the basis for closing this gap.
Within the field of manufacturing strategy, the focus of research has been on
the area of content, but the process has received increasing attention during the
last 15 years. During this period, frameworks and some operationalised
processes for manufacturing strategy formulation have been developed, but
have hardly been applied in practice. The length and a lack of usability and
usefulness have been identified as the main reasons for this low level of
application in practice.
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Research Aim, Objective and Programme
3 Research Aim, Objectives and Programme

This section presents the research problem in section 3.1, which builds upon
the results of the literature review. The aim and objectives of this work are
demonstrated in section 3.2. Finally, an outline of the research programme will
be given in section 3.3.
3.1 Research Problem

The literature review has shown that a variety of frameworks and
operationalised processes for manufacturing strategy formulation have been
developed during the last decades. Despite the number of developed
processes, the manufacturing strategy process related literature has received
much less attention than the content related one.
Surveys and publications about the practical application of manufacturing
strategy formulation processes have shown that the processes have rarely been
applied in practice. This has been traced back to a lack of usability and
usefulness of the processes as they also have been regarded as too long and
complicated. Despite the lack of application of the processes, the need and
interest in prescriptive formulation processes has been high as a manufacturing
strategy supports a company to create competitive advantage. Furthermore, a
gap between manufacturing strategy and business strategy research has been
identified, which also can be recognised in the formulation processes.
3.2 Aim and Objectives

The aim of the thesis is to
develop a state-of-the-art process for manufacturing strategy formulation.
The idea of this aim is to develop a process for manufacturing strategy
formulation that on the one hand incorporates recent research into such a
process and on the other hand is designed for an application in practice. In
order to achieve this aim, a set of objectives has been established. The
objectives reflect the successive approach, which has been chosen for this
work. It starts with defining a broad framework, before this framework will be
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used to guide the definition of the steps for the formulation. Finally, the steps
will be filled with tools and techniques to finalise the formulation process. With
regard to the research problem and the definition of manufacturing strategy that
has been presented in chapter 2.2.1, the objectives are as follows:
(1) Identify a framework for strategy formulation that:
(a) Represents a fundamental concept for strategy formulation from the
beginning of the formulation process to the implementation
(b) Allows
analysing
existing
manufacturing
strategy
formulation
processes on one single scheme

(2) Establish an adequate process including the tools to formulate a
manufacturing strategy. In order to overcome limitations of existing
processes, further requirements are:
(a) The sequence and tools should be designed to specific criteria, which
represent the focus on the application of the process
(b) Recent manufacturing strategy frameworks should be reflected
(c) It should ensure an alignment of business and manufacturing strategy
(3) Test the manufacturing strategy formulation process in order to get
feedback about the quality of the designed process.
3.3 Research Programme

The research programme will be divided into three stages. Each step of the
research programme correlates to one of objectives of the thesis and covers
one chapter of this work. A successive methodology has been chosen to design
the manufacturing strategy formulation process.
Stage 1: Formation of the theoretical basis
A framework for manufacturing strategy formulation will be established
in this stage. This framework builds upon theoretical concepts of
strategy formulation and strategic decision making in general. By the
framework, a fundamental approach for strategy formulation will be
presented and the scope of the process will be defined. This framework
forms the basis for the analysis of existing manufacturing strategy
formulation process and for the development of the new process. For
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each step of the framework, the tools and techniques of existing

manufacturing strategy formulation processes will be presented. Thus,
the existing processes will be structured and gaps of these processes
to the framework will be apparent. Tools from business strategy
literature and decision-making fill the gaps where manufacturing
strategy processes do not provide operational tools or do not reflect
current research. At the end of the formation of the theoretical basis,
further aspects regarding the application of the formulation process will
be presented.
Stage 2: Formation of the manufacturing strategy formulation process
In this stage of the programme, the final process will be designed and
each step of the formulation process will be equipped with the
appropriate tools. The process will be based on stage 1 of the research
programme. First, an operational framework will be developed, which
forms the basic structure of the process. In a second step, the tools
and techniques for the steps will defined. In order to define the most
suitable tools, the existing tools and techniques for each step will be
evaluated due to defined criteria, which represent the customer focus
of this process. For the evaluation, a qualitative approach combining an
advantage-disadvantage scheme and multiple criteria evaluation will be
applied. Based upon the evaluation, the tools will be selected. The
sequence, tools and application aspects of the final process will be
explained in detail.
Stage 3: Testing of the process
The process will be tested based on a case study where the process
will be applied within a company. The case study approach has been
chosen in order to get reliable, immediate feedback. The feedback will
be given by the participants of the process in form of an oral feedback
and a questionnaire. The process will be illustrated with some
completed worksheets of the application.
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4 Formation of the Theoretical Basis

This chapter will form the theoretical basis for the manufacturing strategy
formulation process, which will be developed in this work. After presenting the
methodology of this chapter in section 4.1, a framework for manufacturing
strategy formulation will be presented in chapter 4.2. This framework will be
used to illustrate existing tools and techniques for each of the steps of the
framework. They will be described in section 4.3. As a practical application of a
strategy, formulation process has to deal with more than merely steps and tools,
the surrounding aspects of the application of the process will be covered in
section 4.4.
4.1 Methodology
In order to establish a framework for manufacturing strategy formulation,
literature in the fields of manufacturing strategy, business strategy, strategic
decision-making and systems engineering has been analysed. The target was
to identify a widely accepted framework for strategy formulation, which can be
transferred to manufacturing strategy formulation. This framework further is
meant as a fundamental basis to be able to analyse and cluster existing
processes, frameworks and just single tools for manufacturing strategy
formulation due to one single basic scheme.
Analysing, which tools exist for each of the steps of the framework requires a
two-step approach. The first step is based on a literature research.
Manufacturing strategy formulation frameworks and operationalised processes
have been analysed regarding their sequence of steps. These models have
been mapped on a form sheet. Within this form sheet, the processes have been
classified into frameworks and processes. For each of these frameworks and
processes the aim, the input, output and a brief description of each step of the
formulation process have been filled into the form sheet. The results are
presented in Appendix I. In the next step, the above-mentioned framework,
which will be established in section 4.2, has been used to plot the stages and
the used tools and techniques of the manufacturing strategy formulation
- 16 -
processes on one single scheme (Appendices II & III). Thus, the used tools and
techniques have been clustered and gaps between the framework and the
existing processes have been identified. Additionally, specific literature for each
step has been used to get the input of specialists for the bespoke field of
research. For the analysis of the aspects beyond the mere steps of the process,
existing manufacturing formulation processes have been studied. These
surrounding aspects and suggestions from the existing processes will be
presented in chapter 4.4.
4.2 A Framework for Manufacturing Strategy Formulation

Various researches in strategy related fields have come up with systematic
approaches in order to formulate and form a strategy or to take a strategic
decision. In this section, a framework for strategy formulation will be
established; it will be applied in chapter 4.3 to put existing frameworks and
processes about manufacturing strategy formulation into a wider context by
allocating the steps of each process to the steps of the fundamental framework.
The allocation of the processes to the framework further reveals, where existing
manufacturing strategy processes lack concepts.
Tan and Platts (2005) state that effective strategy formulation requires the
effective setting of objectives, the identification and evaluation of alternative
actions and the implementation of the selected choice. This view has been
shared by researchers in the field of business strategy development, strategic
decision-making and systems engineering (Bower, 1972; Mintzberg et al., 1976;
Hofer and Schendel, 1978; Eisenhardt and Zbaracki, 1992; Nutt, 1993; Daenzer
and Huber, 2002). Including the analysis stage, the framework consists of the
following five steps (the number of steps may vary in the references, as they
sometimes are decomposed):
1. Analysis
2. Direction Setting
3. Uncovering Alternatives
4. Evaluating Alternatives
5. Implementation
- 17 -
The steps follow the systematic order of first identifying the status quo, agreeing
on a desired future status, finding possible alternatives for achieving this status
and finding the best solution of these alternatives before implementing it.
As some manufacturing strategy formulation processes start with the analysis
(e.g. Kim and Arnold, 1996; Miltenburg, 1995; Kerr and Greenhalgh, 1990;
Samson, 1992; Fine and Hax, 1985, Hayes and Wheelwright, 1978 and
Skinner, 1969) and some start with setting objectives (e.g. Baines, 2005, 2007;
Oram, 2005; Platts, Mills and Gregory, 1990 and Hill, 1989) it can be argued to
interchange these steps. Researchers in strategic decision-making (Nutt, 1993)
and business strategy (Mintzberg, 1976; Hofer and Schendel, 1978) have
started with the analysis before setting the business direction. This order has
also been applied in this work; therefore, it starts with the analysis. Starting with
the analysis phase to use these results for the direction setting also is meant to
increase the usefulness of the process by increasing the awareness of the
current situation before defining the future aspirations. The implementation is
the last step of this framework. This should ensure that a formulation process at
least prepares an implementation to guide the core of a strategy (as shown in
chapter 2.1), the actions and decisions.
4.3 Steps, Tools and Techniques for Strategy Formulation

This section uses the framework of section 4.2 in order to provide an overview
of the existing tools and techniques for strategy formulation and cluster them
due to the steps of the framework. The structure of this chapter follows the
steps of the framework.
4.3.1 Tools and Techniques for the Analysis Stage

The Analysis stage is probably the one that has received most attention by
researchers. This has lead to the development of an enormous variety of tools
and techniques. In order to provide a systematic overview of these tools and
techniques, the analysis stage will be divided into four levels, which can be
analysed differently: the analysis of the global environment, the industry
analysis, the company analysis and the analysis of the manufacturing function
(Figure 5).
- 18 -
The analysis of the global environment sees the company in the whole context,
whereas the industry analysis sets the boundaries on a narrower basis and
examines the industry of the company or the business unit. The other two levels
have an internal view and analyse the company or, even more specific, the
manufacturing department.
Global Environment
Industry
Company
Manufacturing
Figure 5 - Levels of strategic analysis
Analysis of the Global Environment and its Tools & Techniques

The global environment consists of all external influences that affect its [the
companys] decisions and performance (Grant, 2002). As the company is one
element in the whole environment, a change in the environment might have
major impacts on the company and the manufacturing division. Thus, by
analysing the global context, factors that might possibly affect the company in
the future are actively foreseen. Furthermore, a structured analysis of the
environment forms the basis to manage it, e.g. for stakeholder management
(Freeman, 1984).
For this kind of analysis, different methodologies and frameworks have evolved.
Two of the best-known ones are the PEST-Analysis and the Stakeholder
Analysis.
- 19 -
The PEST-Analysis classifies the environment according to four sources:

political, economic, social and technological factors (Fahey and Naranayanan,
1986). This process requires the four activities of scanning the environment,
monitor it for specific patterns, forecast the future direction and assess the
effect on the firm (Ginter and Duncan, 1990) for each of these categories.
Greenhalgh (1991) applied the method in his manufacturing strategy
formulation model with a focus on the impact on the manufacturing division
instead of on the company.
The Stakeholder Analysis, in contrary to the PEST-Analysis, does not identify
the trends and events that have an impact on the company, but tries to identify
the expectations that different interest groups have on the companys behaviour
and performance. The idea is that after having analysed all the stakeholders,
the future environment can actively be influenced or even created by the
company. Thus, the aim of the Stakeholder Analysis is to identify all the
different interest groups and understand their relationship to the company and
their expectations (Freeman and McVea, 2006) to be able to act according to
them in a later step. Greenhalgh (1991) also mentions this aspect in his model.
Industry Analysis and its Tools & Techniques
Industry analysis can be conducted on two levels (Grant, 2002). On the one
hand, the industry environment can be analysed, whereas on the other hand for
each industry an intra-industry analysis can be done (Figure 6).
Industry Analysis
Industry Environment
Intra-Industry Analysis
Competitor
Analysis
Customer/market
Analysis
Figure 6 - Different approaches to industry analysis
The intention of analysing the industry environment is to identify which macrolevel aspects have an influence on the relationship between the firm, its
- 20 -
customers, suppliers and competitors (Grant, 2002). This analysis identifies the
attractiveness of an industry. One important element is the profitability of the
industry (Skinner, 1969). A holistic analysis of the industry environment is
provided by the 5-Forces framework (Porter, 1979). This framework analyses
the threats by strong suppliers, buyers and strong competitors. Additionally,
threats of entry and substitutes are taken into consideration.
The intra-industry analysis can be conducted in two dimensions: the
customer/market and the competitor dimension (e.g. Mills and Gregory, 1990;
Hill, 1993; Miltenburg, 1995).
A customer focused tool is the target group analysis (Kerth and Ptmann,
2005), which tries to identify who the customers are, which clients the company
wants to target with the product and what requirements the customers have. In
order to identify the market requirements, competitive priorities (section 2.3.2)
have been identified by the majority of processes. Most of them propose
scoring-schemes in order to define these competitive priorities (e.g.
Wheelwright, 1984a; Samson 1991; Miltenburg, 1995; Swink et al, 1997; Kim
and Arnold, 1996; Baines, 2007). Hill (1993) additionally introduced the concept
of order-winners and order-qualifiers. Order-qualifiers represent the criteria,
which are necessary to stay in the market; order-winners are the ones that
lead customers to buy the product. This model has been applied in the
manufacturing formulation processes of Berry and Hill (1999) and Menda
(1997), as well as in the business strategy formulation model of Acur and Bititci
(2004).
Regarding the competitor analysis, a widely spread method in practice is the
financial analysis of the competitors (Slack et al, 2004; Glaister and Falshaw,
1999), whereas theoretical processes propose a more detailed analysis. This
can be a best-practice analysis (Miltenburg, 1995) or a ranking of the
competitors on the same competitive criteria as applied in the customer analysis
(Berry and Hill, 1999; Baines, 2007). An extended analysis is suggested by
Skinner (1969) and has been incorporated into the process of Greenhalgh
(1991). In order to get a realistic view on the competitors, their product portfolio
as well as their strengths and weaknesses should also be analysed (Kerth and
- 21 -
Ptmann, 2005). An additional aspect is named in business strategy literature

(Grant, 2002): as competitors are changing their views and targets as well, their
possible future strategy has to be predicted. Game theory tries to consider this
fact but so far is not developed to a point where usable analytical tools have
been developed (Grant, 2002).
Company Analysis and its Tools & Techniques
On the company level, an extended variety of analysis methodologies and
related
tools
and
techniques
has
been
proposed
by
business
and
manufacturing strategy literature. Depending on the view on strategy, the focus

of the analysis is rather market-driven or resource and competence-based.
Some approaches try to incorporate both views on strategy (Acur and Bititci,
2004; Pun, 2003).
Figure 7 - Different approaches to company-level analysis
Market-driven methodologies are the value proposition model, lifecycle analysis,

portfolio techniques, benchmarking and scoring schemes for competitive
criteria. The basic idea of market-driven approaches is that the customer the
market has to be the focus for any strategic direction. Any strategy thus, has
to focus on the customers requirements and values.
The value proposition model of Treacy and Wiersema (1997) intents to define
the strategic dimension of the company and thus is similar to Porters theory of
competitive strategies (1980). In their approach, any successful company has to
compete on one of three generic value disciplines. These value disciplines are
operational excellence, customer intimacy or product leadership. The strategy
focus depends on the chosen discipline and the customer that should be
targeted by the strategy. Competing in operational excellence implicates a
production focus with special attendance to product price and convenience.
Tailored products and services are necessary to create strong customer loyalty
- 22 -
for competing on customer intimacy whereas the production of innovative

products is the key for product leadership. The model is applied in the
approaches of Baines (2007) and Acur and Bititci (2004).
Menda (1997) suggests the use of the product lifecycle in order to determine
future possibilities for product groups. The products or services are mapped on
a generic curve with the dimensions time and turnover. The curve describes a
generic lifecycle that any product pursues in theory. Thus, the future
development of the product or service can be derived; it can provide data about
necessary investments in machinery or marketing depending on the position on
the lifecycle.
A similar output can be achieved by the use of portfolio techniques (e.g. BCGmatrix, A.D.Little-matrix). Portfolio techniques in general aim to cluster products,
services or business units due to mostly two variables, one of it company
related and one environment related. By this approach, the current contribution
of the product or service and its potential are taken into consideration for the
allocation of resources (Macharzina, 1999). The BCG-matrix is probably the
easiest one, but also the one that has found widest acceptance in practice. It
uses market growth and market share as dimensions. The product groups are
plotted on the matrix. Thus, possible needs for investment and strategic
direction can be derived.
Benchmarking evaluates the companys performance or processes in
comparison to the competitors (Kerth and Ptmann, 2005, Hrvath, 1992).
In manufacturing strategy formulation processes, scoring systems have widely
been applied for the identification of the companys performance. Mills et al.
(1990), Hill (1993) and Baines (2007) rank the performance based on
competitive criteria. Miltenburg (1995) and Baines (2007) also use this scheme
for a simple benchmarking by mapping the competitors performance as well.
The resource and competence-based methodologies comprise an analysis of
core competencies and skills as well as soft methods like a cultural analysis.
These approaches rather than seeing the market as the driver for strategic
development, see the companys internal capabilities and its distinguishing
abilities as the basis on which the companys strategy should be built. The
- 23 -
underlying idea is that a company that is aware of its resources and

competences can use them according to their targets (Kerth and Ptmann,
2005) and even transfer these capabilities to new markets (Prahalad and
Hamel, 1990).
Core competencies are such technologies and competencies that add value for
the customer; they allow creating competitive advantage and can be transferred
to new markets (Prahalad and Hamel, 1990). Typical core competencies often
are intangible like know-how, process knowledge or experience (Kerth and
Ptmann, 2005). Greenhalgh (1991) uses an approach similar to the core
competency-analysis in his process. Brown and Blackmon (2005) divided the
core competencies into the three groups of process, product and network
capabilities and incorporated the identification of these capabilities into their
framework.
The culture analysis sees the companys values as the basis for actions and
decisions of the company. The underlying idea is that the shared values of the
employees, which form the culture, determine procedures, patterns of thinking
and therefore are the basis of the daily decisions. In this way, they have an
impact on the companys performance (Fang and Wang, 2006). This
consequently means in order to improve the performance you have to
understand the current culture and either generate a benefit from the current
culture or create a different culture. The basis for both options is to analyse the
current culture. For this analysis, Denison (1984) proposed the application of a
cultural web.
The analysis of former strategies incorporates the learning aspect into the
strategy formulation; it can be seen as another resource-based analysis. This
approach can be used in order to understand how the company works and what
kind of strategies are dominant, emergent or intended ones (Mills et al., 1998).
It further can underline the culture analysis as the predominant past strategies
indicate prevailing working patterns. A strategy map is one way of doing it and
has been applied by Mills et al (1998) and Acur and Bititci (2004).
Furthermore, integrative methodologies like Porters value chain analysis
(1998), McKinseys 7S-framework or a SWOT analysis have been suggested.
- 24 -
These methodologies try to combine the internal resource and competence

aspects with the external market-driven aspects.
The value chain analysis is a process-oriented analysis, which identifies the
activities that generate value (Porter, 1985). Thus, the source for competitive
advantage can be determined by focussing just on value generating activities
and the strategic levers can be identified. These levers define the key for
strategic development.
McKinseys 7S-framework is based on the idea that the balance of seven
categories, namely Skills, Style, Systems, Structure, Strategy, Staff and Shared
Values determines the performance (Kerth and Ptmann, 2005). The SWOT
analysis reflects the internal aspects (strengths and weaknesses) and combines
it with the external ones (threats and opportunities). It is used in the process of
Greenhalgh (1991) as well as by Cheng and Musaphir (1996) as a final
analysis.
As the presented techniques are all static in their nature, Kerr and Greenhalgh
(1991) suggest the use of a dynamic tool, scenario techniques. Scenario
techniques model the current situation and possible future situations and their
impact on the company. By this, the arena for possible alternatives can be
widened (Gtze, 1991).
Manufacturing Level Analysis and its Tools & Techniques
For the analysis of the manufacturing level, some techniques of the company
level analysis are used on a manufacturing basis. The content of these tools
changes, whereas the tool itself remains the same. Furthermore, some more
specific analysis techniques are applied.
Fine and Hax (1985) suggest a SWOT-analysis based on the nine
manufacturing strategy decision areas provided by Wheelwright (1984). Mills
and Gregory (1990) as well as Miltenburg (1995) reduce this to an analysis of
the strengths and weaknesses. Miltenburg also analyses the current practices
for each of these decision areas.
The analysis of the competitive criteria and their importance is translated into
manufacturing priorities in the approaches of Greenhalgh (1991) and Fine and
Hax (1985). Identifying manufacturing priorities is also one of the steps the
- 25 -
authors using QFD (Jalham et al., 2006; Crowe and Cheng, 1996) undertake.
Meybodi (2006) suggests a rather extended analysis of the manufacturing
performance in each of the decision areas and an identification of the most
critical process. A widely applied tool for the manufacturing department analysis
is the product/process matrix (Miltenburg, 1995; Hill, 1993), which analyses the
fit between the volume of production, the flexibility and the currently used
process configuration.
Hayes and Wheelwright (1979) suggest a combination of lifecycle/process
matrix, which has been applied in the approach of Fine and Hax (1985). The
underlying idea of this matrix is that production volume changes over time and
therewith the most economic process configuration changes as well.
Skinners paper about the focused factory (1974) introduced the aspect of focus
to manufacturing strategy. Hill (1993) applied a focus analysis on a plant basis,
whereas Greenhalgh (1991) suggests an extended analysis of focus of a variety
of aspects.
4.3.2 Strategic Direction Setting

Setting the direction where the company should be in the future could be done
on two different levels: by a vision or/and by objectives. These levels are
distinguished by their scope, the time horizon and the precision of target
(Johnson, Scholes and Wittington, 2007). The presence of one of the levels
does not exclude the presence of the other; in contrary, the presence of a vision
requires some kind of measurable targets. One central aspect of the different
levels is the consistency between them and within a single level (e.g. Skinner,
1969; Wheelwright, 1984; Krajewski et al., 2007).
Defining a Vision to Direct the Strategy
In the traditional definition, a vision creates an idealistic future for the company
with a realistic target (Watzawick et al., 1974). It is highly based on the values of
a company. A vision has a clear and compelling imaginary (Hitt et al., 2006)
and tries to tap the employees emotions in order to bring enthusiasm to the
workplace in order to encourage people to develop innovative solutions.
- 26 -
In 1989, Hamel et al. enriched the vision discussion by introducing strategic

intent, which strongly emphasises the aspect of competitive innovation and
thus is strongly competition based in its nature. Examples like Canons beat
Xerox or Komatsus encircle Caterpillar show examples where companies set
a defined target that created an intended unbalance between the target and the
companys current capabilities. The underlying idea is to create a stable target
over time that like a traditional vision deserves personal effort and
commitment and allows varying means to fulfil the vision. Thus, strategic intent
needs objectives and/or defined criteria, which define the current necessities to
fulfil the vision. Samson (1991) suggests the formulation of a vision based on a
discussion as part of the manufacturing strategy formulation process.
Setting Objectives to Direct the Strategy
The term objective is not clearly defined in management literature (Thompson
and Strickland, 1980; Johnson, Scholes and Wittington, 2007). In this text, a
strategic objective is a future target that refers to a specific kind of result that
has long-term implications for a company (McManus and Botten, 2006;
Thompson and Strickland, 1980). It is always related to the companys
resources (Vancil, 1976).
Manufacturing strategy formulation processes (e.g. Fine and Hax, 1985; Platts
1990) focus on the formulation of objectives in terms of competitive criteria.
4.3.3 Tools and Techniques for Uncovering Alternatives

Decision-making and problem solving theory define the development of
alternatives as the first essential step in order to be able to define necessary
actions (Nutt, 2004; Thompson and Strickland, 1980). Drucker (1980) already
identified that alternatives are the necessary basis for any decision.
Nutt (2004) identifies that a lack of search for strategic alternatives is the main
reason why about 50% of strategic decisions fail. Decision-makers sometimes
rush to judgement, apply failure-prone decision-making practices and make
poor use of their decision-making resources. Thus, the idea of generating a
variety of alternatives, which take into consideration different perspectives of the
- 27 -
problem, is to find the best possible overall solution within the boundaries of
rationality of decision-makers.
The process of generating alternatives requires various managerial resources,
their experience and idea generating tools (Tan and Platts, 2003). In order to
encourage creative thinking and broadening the search, Nutt (2004) proposes
three approaches. The first is to expand the arena of action, which means to
identify key stakeholders and their interests and concerns. The second proposal
is to set broad objectives and the third is to use multiple perspectives
(organizational, personal and technical).
Decision-making theory suggests structuring the problem or objective before the
creative techniques will be used. Tools for this structuring are the why/why
method, the fishbone diagram invented by Ishikawa or Simons (1969)
decomposable matrices. Tools like cognitive mapping and mind mapping
(Buznan, 1994) try to structure a problem and its relationships in order to create
a network of linked factors that centre around one specific problem. Systems
thinking provides another way to identify causal relationships of a problem with
other aspects by introducing influence diagrams (Daenzer and Huber, 2002).
For the creative techniques, Van Gundy (2005) identifies more than 100
different ways of brainstorming and related tools. Beyond brainstorming, other
tools are for example synectics, morphological tools, association methods and
paradigm-breaking techniques (e.g. Franke, 1998; Proctor, 2005; Van Gundy,
2005). A structured tool is the problem-solution tree (Daenzer and Huber,
2002).
For manufacturing strategy formulation, Tan and Platts (2003) offer a software
supported tool based on a model of the problem that helps to identify
alternatives.
- 28 -
4.3.4 Tools and Techniques for Evaluating Alternatives

As the aim for decision-makers is to identify the best alternative in order to
achieve a specific target (Hickson, 1987), evaluating alternatives has a very
important role in the process of strategic decision-making. Within this stage, the
effect of the alternatives on different criteria and environmental situations is
analysed (Whe and Dring, 2002) with reference to risk and uncertainty.
Prescriptive as well as normative decision-making literature has come up with a
variety of tools and techniques that lead to strategic decisions. Nutt (2004)
states that decision makers spend most of their time and resources on the
evaluation of alternatives. Researchers have identified different categories for
evaluation methods. Nutt (1998) identified four approaches: qualitative,
quantitative, subjective and decisions that did not fit in any of these groups. This
distinction will be used in the following parts.
Despite the importance of this stage for strategic decisions, manufacturing
strategy formulation processes neglected the evaluation as much as the search
for alternatives. Deciding what to implement is mainly described as a breaking
down process (e.g. Samson, 1991; Miltenburg, 1995). In a recent approach,
Baines (2007) applied a qualitative evaluation scheme.
Quantitative Approaches towards the Evaluation of Alternatives
Using the quantitative approach, information is combined in order to obtain new
information (Nutt, 1998).
Tools used for the quantitative approach are mainly analytical tools, e.g. data
gathering tools, forecasting or multi-attribute utility development.
In order to produce decisions from data-gathering, financial calculations as costbenefit analyses or rate-of-return calculations are frequently used tools. The
mathematical methods applied in operations research are also part of the
analytical approach, as well as the usage of simulation tools that allow drawing
conclusions from a mock-up. Another way of obtaining data is the installation of
a pilot project (Nutt, 1998).
- 29 -
Qualitative Approaches towards the Evaluation of Alternatives

A qualitative assessment ranks the alternatives in order to reveal their merit
(Nutt, 1998). The qualitative approach is a consensus-reaching approach that
allows using different kinds of data including hard and soft facts. Ranking
schemes like multiple criteria evaluation or advantage-disadvantage methods
are widely applied tools for this approach.
Crowe and Cheng (1997) used multiple criteria to be able to rank different
alternatives for strategic initiatives and manufacturing options in order to align
initiatives between the different functional levels and the business level and find
consistent manufacturing actions. Baines et al. (2005) use a variety of different
criteria
(FACTS,
Financial,
Acceptability
to
Organisation,
Customer
Acceptability, Technological Fit and Strategic Fit). These different criteria reflect
Nutts (2004) call for using different perspectives to be able to find a suitable
solution. A qualitative approach that also incorporates the uncertainty aspect is
the one used by Luehrman (1998) in his concept of strategy as a portfolio of
real options. This approach classifies the alternatives due to their expected
outcome and its uncertainty. On this basis, the alternatives are classified and
the model suggests an immediate implementation, no implementation or a
possible future implementation.
Subjective Evaluation of Alternatives
The subjective approach is mostly based on the personal opinion of an expert,
the decision-maker or a sponsor, who uses arguments more than data for the
assessment (Nutt, 1998). Still, data analysis can be used as a background for
the subjective decision.
4.3.5 Tools and Techniques to Guide the Implementation

The implementation is the realisation of the formulated strategy. Thus, it follows
the formulation and is out of scope of the formulation process itself. However, in
order to ensure the realisation, the formulation process has to form the basis for
the implementation. To reach this aim, an action programme (Fine and Hax,
1985; Tan and Platts, 2005), an operating plan (Greenhalgh, 1991) or an
implementation plan (Miltenburg, 1995) have been suggested by researchers.
- 30 -
Greenhalgh (1991) states that the purpose of such a plan is to define which
sections of the strategy have to be implemented in the following year to ensure
that the operating targets are consistent with the objectives. It is required that
performance measures are agreed upon in order to be able to control the
progress. Furthermore, responsibilities have to be defined. This purpose and
the requirements for the implementation are consistent with these of other
manufacturing strategy authors (Skinner 1969; Fine and Hax, 1985; Miltenburg
1995; Tan and Platts, 2005; and Baines, 2007) as well as with authors of
business strategy (Thomson and Strickland, 1980; Hitt et al., 2006) and project
management (Lock, 2002).
Baines (2007) realised the requirements by means of a policy deployment
matrix (PDM), where all objectives, targets and responsibilities are linked on
one single page. Miltenburg (1995) uses a project plan as a basis and additional
documents
for
defining
and
controlling
the
implementation,
whereas
Greenhalgh (1991) proposes a complex written document that he calls

Operating Plan.
4.3.6 Summary of Tools and Techniques

This section has presented a variety of tools and techniques, which can be
applied for each of the steps of the framework. Different methodologies have
developed for the analysis, depending on the scope of the analysis, which can
be global, the industry, the company or the manufacturing function. The
analysis of the processes for manufacturing strategy formulation has shown that
this phase of the process has received most attention of all phases. Setting
clear objectives as part of the formulation process has also been applied in
analysed processes, whereas defining a vision has received more attention in
business strategy. Despite the numerous techniques for uncovering alternatives
to achieve the defined direction, this step has hardly been covered in
manufacturing strategy formulation processes. It has mostly been described as
a breaking-down process. Regarding the evaluation of the alternatives, different
methodologies have been developed by decision-making theory, whereas only
a few qualitative approaches have been applied in the manufacturing strategy
- 31 -
formulation processes. This phase has just received minor attention in existing
processes as well. The implementation phase including the definition of an
action-plan has been recognised by researchers, who share the view of strategy
as a pattern of actions.
As this section has presented existing tools for each of the phases of the
framework for strategy, these tools and techniques form the basis for the
formation of a coherent set of steps to formulate a manufacturing strategy.
4.4 Further aspects regarding the Application of the Process

After section 4.3 has presented the possible tools and techniques for a strategy
formulation process, this chapter will deal with further aspects regarding an
application of such a process. Platts (1994) argued that a formulation process
and the success of it not only depend on the sequence of steps, but also on
how the process as such is embedded into the organisation. He developed four
aspects, which have to be considered for the application of a formulation
process. The four aspects are point of entry, participation, procedure and
project management. They will be applied for this work as well.
Point of Entry
The point of entry describes the method of entry into the company or business
unit to develop understanding and agreement of the management team (Mills et
al., 1995).
The point of entry can be divided into two levels. The first level deals with the
question how the process fits into the strategy formulation process; the second
one explains why the process was started.
Regarding the first aspect, the process can either be part of a hierarchical
strategy formulation process, which has higher-level strategies. In this case,
these strategies will be an input for the manufacturing strategy. It can also be a
stand-alone process, where the business objectives are defined as part of the
process without any input of higher-level strategies.
Regarding the second level, Baines (2007) identified two possibilities. The
process can either be started reactive as a reaction to a specific issue or
proactive as part of a strategic planning meeting.
- 32 -
Participation in the Process

Participation defines the group(s) of people required for the process. Platts and
Gregory (1990), Fine and Hax (1985) or Leong et al. (1990) recommend the
participation of all functions, Hill (1993) states that at least marketing should be
involved. Crowe and Cheng (1996) suggest different participants in different
steps of the process.
The Procedure of the Process
The procedure describes the sequence of the stages as well as the used tools
and techniques. The sequence of stages is the key for forming a coherent,
target focussed process. The possible tools and techniques have been
presented in section 4.3.
Project and Process Management
Mills et al. (1995) identify two aspects that are important for the project and
process management: adequate resourcing for managing, supporting and
operating groups [] and a time scale. The time scale range for the process
leads from a few days (Schroeder and Lahr, 1990; Mills et al., 1996; Baines,
2007) to a few months (Menda and Dilts, 1997).
4.5 Chapter Summary

This section has established a widely accepted framework for strategy
formulation, which is based on manufacturing strategy, business strategy,
decision-making and systems engineering literature. Furthermore, a variety of
tools and techniques has been presented that has been suggested by
researchers. The analysis of the present tools has underlined the fact that
manufacturing strategy formulation processes focus strongly on the analysis
stage and offer a variety of tools for this step, but hardly offer tools that allow
getting from the setting of objectives to the definition of actions. The gap for
these stages can be closed by tools provided by other fields of research. For
the implementation, existing processes for manufacturing strategy formulation
present tools, which are consistent with other fields of research.
- 33 -
For the success of the process, not only the procedure and the used tools are
important, but also further aspects regarding the application of it. These aspects
have been covered as well.
- 34 -
Formation of the Manufacturing Strategy Formulation Process
5 Formation
of
the
Manufacturing
Strategy
Formulation Process
In this section, the operational process for manufacturing strategy formulation
will be developed and presented. Therefore, it builds upon the framework, the
tools and techniques presented in chapter 4. First, the methodology to design
the process will be outlined (section 5.1), before an operational framework
(section 5.2), the evaluation of the tools and techniques (section 5.3) and the
process itself will be presented (section 5.4).
5.1 Method for the Development of the Formulation Process

Basing upon the aspects mentioned in section 4.4, the formulation process has
been split into a coherent sequence of steps. For each step a purpose, the
applied method, the output of the step and the participants will be defined in this
chapter. The method for the design of the manufacturing strategy formulation
process comprises three main steps:
Development of an operational framework
Evaluation of the tools and techniques
Composition of the process
The idea of formulating an operational framework is to define the basic structure

of the manufacturing strategy formulation process including the purpose of each
step and the participants. Once, the basic structure has been developed, the
appropriate tools and techniques have to be identified for each step. In order to
define these tools and the output of each step, an evaluation of the tools and
techniques presented section 4.3 has been conducted due to specific,
customer-focused criteria. In a final step, a coherent manufacturing strategy
formulation process will be composed.
5.1.1 Development of an Operational Framework

As presented in section 4.4, any process for manufacturing strategy formulation
consists of a sequence of steps, which define what has to be done in which step
and who will participate in this process. The operational framework describes
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the basic sequence of the process procedure without the detailed tools and
techniques for each of the steps. For the development of the operational
framework, the framework for a strategy formulation process (section 4.2) and
the application aspects (section 4.4) have been combined. As section 4.2 has
presented basic steps for any strategic decision, this framework still needs to be
transferred to the case of manufacturing strategy formulation. Available
concepts and the requirements for the process (section 3.2) have been taken
into consideration in order to define the systematic order of steps as well as the
necessary participants of each step. The definition of the purpose of each step
has been established first before the participants have been identified. Thus,
the complete operational framework has been developed incrementally.
5.1.2 Evaluation of the Existing Tools and Techniques

After the basic sequence of steps has been clarified in the operational
framework, each of the steps requires a clear set of tools in order to establish a
process for manufacturing strategy formulation, which can be applied in
practice. The basis for the tools and techniques that will form the core of the
process, are the in section 4.3 presented tools. A qualitative evaluation has
been conducted for the presented tools in order select afterwards the
appropriate ones. The evaluation is based on a two-step approach. First, an
advantage-disadvantage scheme has been completed, which is based on
information of textbooks and research studies. The second step is a multiple
criteria evaluation. Three criteria have been identified, which are important for
the composition of the manufacturing strategy formulation process and scores
have been allocated to the tools, taking into consideration the advantages and
disadvantages identified before.
5.1.3 Composition of the Process

The composition of the process finalises the formation of the manufacturing
strategy formulation process. The operational framework and the evaluation of
the tools have formed the basis for the composition of the process. The
evaluated tools have been allocated to the steps of the operational framework
due to their score in the evaluation. One tool for a focused way of uncovering
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alternatives has been developed in order to combine advantages of two existing

tools. Considering the requirements of section 3.2, a process has been
composed that follows a systematic order, forms one single entity and has been
designed for a practical application in industry and service organisations.
5.2 The Operational Framework

This section uses the four aspects of the process application from section 4.4 to
present the operational framework.
Point of Entry
The study of Marucheck (1990) shows that manufacturing strategy formulation
in practice can either be a process in isolation, where the business objectives
will be formulated within the process, or part of a hierarchical process with the
business objectives as an input to the process. Baines (2007) further
distinguishes between reactive and proactive approaches towards strategy
formulation, which means that the process either reacts on an internal or
external event or tries to prevent issues by formulating the strategy proactively.
As the alignment of business strategy and manufacturing strategy is one
requirement of the process (section 3.2), the point of entry will be flexible in this
process. The designed process allows being a process in isolation, which
requires the formulation of business objectives as well as being incorporated
into a hierarchical formulation process. The analysis stage can reflect current
issues for a reactive approach as well as being used for a proactive approach.
Procedure
Using the framework for manufacturing strategy formulation (section 4.2) and
the requirements for the process, a procedure that allows aligning
manufacturing and business strategy and that provides an action plan as output
has been composed (Figure 8). The tools used in the stages will be presented
in section 5.3. The whole process consists of five steps on two different levels of
the company, the business level and the manufacturing level (Figure 8).
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The five steps are:
Analysis
Direction Setting
Manufacturing Objectives
Manufacturing Initiatives
Manufacturing Policy Deployment
Figure 8 - The operational framework
The first two steps are identical to the ones of the framework presented in
chapter 4.2. Step three of the process transfers the direction setting phase to
the manufacturing function. Step four of the process combines the steps of
uncovering and evaluating alternatives, whereas step five defines the necessary
actions for the implementation of the manufacturing strategy.
Participation
The process described in this work is divided into two levels that require
different participants following the approach of Crowe and Cheng (1996). The
first two steps are on the business level and require a wide involvement across
the functions, which mean the whole leadership team. By involving the whole
leadership team into the analysis and direction setting phase, the original idea
- 38 -
to integrate the manufacturing function into this process formulated by Skinner

(1969) is reflected. Analysing and directing with a wide involvement means to
already balance the power between the departments and further incorporate the
knowledge of each department into the process. The last steps will be on a
manufacturing level, which requires manufacturing expertise and thus a deeper
involvement of the manufacturing function. The manufacturing leadership team
should be involved in these steps. Dividing the participation into these two
levels ensures the alignment between the objectives. Balance between the
overall objectives will be best achieved and manufacturing knowledge will be
applied where it is necessary in order to define the actions to realise the
strategy.
Project and Process Management
The process itself is a workshop based facilitated process. Thus, the facilitator,
who could either be external or a beforehand chosen internal person, is
responsible for the process management. As the time scale for this process is
about two to three days, there is no need for a project management during the
formulation process.
The project management is required after the formulation process has finished.
As objectives, initiatives, targets and responsibilities are the output of the
process, the progress has to be monitored and controlled. Project management
is therefore the essential part of realising the defined manufacturing strategy.
5.3 Evaluation of the Tools and Techniques

This section provides the results of the evaluation. The advantages and
disadvantages of the tools and techniques are based on a selection of
textbooks and research articles and are presented in detail in Appendix IV. For
the multiple criteria evaluation, the criteria Feasibility, Usability and Utility,
developed by Platts (1993) for the evaluation of manufacturing strategy
processes, have been translated into such criteria that can be used for the
process development. The interpretations of Baines et al. (2005) and Tan and
Platts (2003) have been used as a guideline for the translation. The
interpretation of Feasibility (Can the process be applied?), Usability (Is the
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process easy to follow?) and Utility (Did the process provide a good result?)
lead to the following criteria that allow designing a process with a strong focus
on the practical application:
Feasibility for workshops
Ease of use
Expected value of data
As the first criterion is binary, 0 or 1 is the allocated score. The tools and
techniques receiving a 0 do not fulfil the process requirements and will
therefore be excluded. The other two criteria are scored from 1-5. By using the
product of the scores for the overall score, the binary character of the first
criterion is reflected. The scores are allocated based on the advantages and
disadvantages of the tools. The evaluation schemes can be found in Appendix
V.
For the analysis stage, the value proposition model, the customer analysis, the
competitor analysis and scoring techniques received the highest evaluation.
Regarding the steps two and three of the process, the alternatives of defining a
vision and setting objectives have not been evaluated because objectives are a
requirement for any direction setting. Only the decision whether the vision fits
into the process or not has to be done for the formation of the formulation
process. For the fourth stage, the tools have been subdivided in tools for
structuring a problem, problem-solution-techniques and evaluation techniques.
The cognitive map received the highest score for structuring the problem,
whereas the problem-solution-tree received the highest one for the problemsolution-techniques. For the evaluation of alternatives, the qualitative approach,
using multiple criteria, has received the highest score (Table 2 shows an
example of the evaluation scheme).
In order to guide the implementation of the manufacturing strategy, the policy
deployment matrix received the highest evaluation result as it relates the
actions to the objectives and directly to the responsibilities on one single page,
which can be used directly to control the progress of the implementation.
- 40 -
Table 2 - Example of the evaluation scheme
5.4 A Process for Manufacturing Strategy Formulation

This section will present the complete process for manufacturing strategy
formulation including the tools and techniques that form the core of the
formulation process. Based upon the evaluation of section 5.3 the tools that are
the most adequate ones for the process have been selected and worksheets for
the practical conduction have either been developed or adopted from previous
works. An overview of the process is presented in Figure 9.
The worksheets for the process are attached in Appendix VI.
5.4.1 Inputs for the Process

Apart from the knowledge of the participants, a report of the markets of the
company should be compiled in advance of the process. This report should
divide the markets according to three characteristics (Grant, 2002): product
related, customer related and geographical market related. The basis for the
segmentation should be differences in competitive priorities (Baines, 2007; Mills
et al., 1996). For each market the position of the company within the market has
to be identified, which includes main competitors and the standing of the
product within the company due to its turnover and contribution.
- 41 -
Figure 9 - Overview of the manufacturing strategy formulation process
5.4.2 Stage 1: Analysis

The analysis phase consists of three sub-steps and follows the approach of
Baines (2007):
Select products and services with shared competitive strategy
Competitive strategy review
Competitive gap analysis
The main sources for the analysis are the market requirements based on
competitive criteria. Thus, the market-based view is prevalent in this stage of
the strategy. The outputs of this step are the competitive situation with the main
competitive gaps to the market and to the competitors.
Select Products and Services with Shared Competitive Strategy
Based on the market segment report, a discussion will be conducted in order to
identify the area that should be analysed. The product and service should be
important for the company either by making a significant contribution or by
future possibilities. The participants finally take the decision which area will be
- 42 -
chosen. Current issues can be a possible input for this stage as well, which will
lead to a reactive approach.
Competitive Strategy Review
The basis for the competitive strategy review is the value proposition model of
Treacy and Wiersema (1997) that distinguishes the strategic dimensions
operational excellence, customer intimacy and product leadership. The review
identifies whether the strategy emphasises rather the customer, the operations
or the product management dimension. The consistency with the desired
strategy will be checked.
The analysis will be carried out based on statements, which will be evaluated
according to a scoring scheme. The future strategic dimensions will be identified
in the same way according to the scheme developed by Baines (2007).
Competitive Gap Analysis
The competitive gap analysis identifies the competitive situation in terms of
what is required by the market and how main competitors perform in these
areas.
The competitive criteria consist of the traditional dimensions of cost, quality,
performance and flexibility (e.g. Hill, 1990; Miltenburg, 1995) but additionally
include product features and the service aspect (adopted from Baines, 2007).
The criteria are (for a description see Appendix VI):
Service customisation
Product customisation
After-sales support
Product availability
Product price
Quality conformance
Product attributes
Time-to-market
Product introduction rate
- 43 -
The customer requirements are evaluated due to their importance with the help
of a scoring scheme from 0-5. A simplified benchmarking is carried out by
mapping the companys performance as well as the competitors performance
on the same scheme. Thus, gaps between the market and the company
respectively the competitors and the company are apparent. Similar scoring
schemes have already been applied in the approaches of Hill (1993), Samson
(1991), Miltenburg (1995) and Baines (2007).
5.4.3 Stage 2: Direction Setting

This stage is divided into three sub-steps as well:
Define business aspirations and constraints
Produce vision statement
Derive business objectives and KPI
The output of this stage is a vision statement as well as objectives for the whole
business. In case that a vision and a business strategy have been defined
previously, they can be used as an input or even replace this stage. Thus, the
process can be incorporated into a hierarchical strategy process.
The idea of defining a vision in recognition of defined constraints is to set a
target that has certain stability but allows flexible objectives and actions to reach
the target. It also guides the objective setting and decisions managers make
when the internal or external context changes. Thus, it can guide and stimulate
emergent strategies. By this, the process takes into consideration the ideas of
Hamel and Prahalad (2005).
Setting objectives means defining the first steps in order to fulfil the vision with
regard to the current situation. The business objectives also emphasise one or
more functions of the company. The fact that they are set by the leadership
team including the manufacturing function reflects the basic idea of Skinner
(1969) and Hayes and Wheelwright (1979) that all functional strategies should
be aligned, but manufacturing should give its input to the corporate strategy.
Furthermore, it reflects Nutts call for the use of different perspectives (2004).
- 44 -
Define Business Aspirations and Constraints

In this stage of the process, the desired future status of the company will be
developed. Using leading questions and the analysis results (especially the
future competitive strategy), a facilitated discussion is the method to define the
aspirations. Constraining factors for the strategy are defined in the discussion
as well. Constraints can include financial, environmental or value-based factors.
Compose Vision Statement
The vision statement should reflect the business aspirations and the
constraints. It should manifest a challenging but reachable future status based
on the analysis in order to set a target that creates an unbalance between the
status quo and the future. Possible inputs are also the values of the company
and environmental factors. The vision is seen as a long-term target. It will also
be defined based on a consensus reaching discussion led by a facilitator similar
to the approach of Samson (1991).
Derive Business Objectives and KPI
The basis for the formation of the business objectives are the vision as well as
the status quo, namely the results of the analysis stage. Thus, the objectives set
the targets that form the first step to achieve the vision. As they are derived
from the vision by the whole management team, it is ensured that the objectives
for the functional areas are consistent. Three to five objectives should be
derived. As the vision does not necessarily have a time horizon or measurable
targets, objectives should be specific, measurable, achievable, realistic and for
a specific time. Finally, the responsible function for an objective has to be
defined. In case that one objective requires participation of more than one
function, the contributions of each function have to be clarified. As any objective
has to be measurable, a KPI for each objective has to be defined to monitor the
progress. The KPI can be either an existing indicator or a new, objectivespecific one. It needs to be agreed upon how to measure the indicator. If
different functions have to contribute to one objective, a KPI for any contribution
that is reflected in the overall KPI for the objective has to be defined.
- 45 -
5.4.4 Stage 3: Manufacturing Objectives

Before stage 3 can be started, a new manufacturing project has to be formed.
After having agreed on objectives on a business level, depth and manufacturing
expertise are required in order to define the functional strategy. The new project
team should be formed by about five manufacturing managers.
As a starting point for this part, all objectives and the vision should be presented
in detail to the new team. In the next step, the manufacturing objectives are
presented and explained in order to get the understanding and buy-in of the
manufacturing management team. The manufacturing objectives are similar to
the business objectives for the manufacturing function.
5.4.5 Stage 4: Manufacturing Initiatives

In this stage the transition from the problem to the solution will be done.
Initiatives are medium term solutions directly related to objectives that have a
wider impact on one of the decision areas of chapter 2.2.2. This process is
divided into four sub-steps:
Select FACTO criteria
Decompose the problem
Generate possible initiatives
Evaluate initiatives according to FACTO criteria
In this stage of the process, the market-based view that is predominant in the
first steps will be combined with the competence-based view, as the objectives
will be connected to the capabilities of the manufacturing department. The
concept of introducing the capabilities at this stage of the process reflects the
argument of Hamel et al. (1989) that the capabilities have to be market-related
in order to create value for the customer. To be able to generate solutions for
achieving the objective, it will be decomposed in order to identify the levers that
can change the current situation.
Select FACTO Criteria
The five criteria selected will be the ones, which will be used in order to
evaluate the initiatives. The evaluation will be a qualitative approach using
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multiple criteria. Furthermore, different perspectives can be incorporated by a

qualitative evaluation. FACTO stands for five categories of criteria, namely:
F Financial
A Acceptability to organisation
C Customer acceptability
T Technological fit
O Objective related criteria
The first four categories are identical to the ones Baines (2007) developed in his
approach. As the specific objective itself needs to be central to the decision on
which initiative will be implemented, this has been chosen as the fifth category.
Using these five dimensions for the evaluation of the initiatives ensures that a
variety of perspectives is used in order to define possible initiatives and to
select the best with regard to multiple views. By applying multi-dimensional
criteria, the research of Nutt (2004) is reflected.
The financial and objective related criteria define the expected efficiency. The
acceptability to organisation and customer acceptability reflect the effect on key
stakeholders, whereas the technological fit introduces a production related
indicator. All criteria can reflect a risk related aspect. The selection of the criteria
can be congruent to the usual assessment of initiatives of the company. If the
criteria have not been applied before, it is essential that the impact of the criteria
and the evaluation of it are agreed upon. In a last step, the importance of the
criteria in comparison to the others will be ranked.
Decompose the Objective
Decomposing the objective allows showing influencing factors for the objective
as well as the capabilities that present the levers for change. In this way, a
focused, directed way of uncovering alternatives is achieved. The idea of
decomposing the objective is based upon the work of Tan and Platts (2005).
The evaluation of existing tools and techniques has shown that the cognitive
map received the highest score for structuring the problem, the problemsolution-tree for the problem-solution-techniques. As the cognitive map can lead
to a loss of focus and the problem-solution tree has a very strict structure, a
- 47 -
new tool has been developed to combine the advantages of both tools, the
structured cognitive map. The structured cognitive map is a cognitive map with
predefined levels. The predefined levels guide the process of uncovering logical
cause-effect strings. It allows flexible solutions that cover the whole variety of
possible manufacturing strategy related issues but on the same hand ensures
the strategic level and prevents from too much detail.
The levels used for the decomposition are:
Objective
Variables
Related capabilities
The objective, as the input for this stage, is taken from stage 3 of the process.
The first step is to identify the variables that have an effect on the objective.
Interrelationships between the variables can be mapped as well. Once having
established the variables, the related capabilities that influence the variable are
identified. Thus, the levers for the problem and the capabilities that have to be
improved are revealed. By identifying the capabilities that influence the variable
and the objective, the competence and resource-based approach has been
incorporated into the process as claimed by Brown and Blackmon (2005). The
areas for internal improvement are identified that allow the company fulfil the
market needs and resources can be allocated accordingly.
Generate Possible Initiatives
The possible initiatives form the fourth level in the structured cognitive map. The
initiatives normally represent the manufacturing decision areas (section 2.2.2).
The applied tool allows focusing only on those initiatives, which are relevant for
the specific objective. The inputs for this stage are the capabilities. The ones
that have major impact on the objective are selected. The current practice for
these capabilities will be identified before the creative process of uncovering
alternatives will be started. For this stage, a brainstorming will be used where
participants identify initiatives that could improve the capability.
- 48 -
Evaluate Alternatives according to the FACTO criteria

The alternatives will be evaluated due to the FACTO criteria that have been
identified in the first step of this stage. Using a scoring scheme, the team will
allocate scores to the initiatives and a ranking of the initiatives will be compiled
based on a qualitative evaluation. The final discussion-based decision is about
which initiatives should be implemented immediately. About five initiatives
should be the target, depending on the expected outcome and the resources of
the manufacturing department.
5.4.6 Stage 5: Manufacturing Policy Deployment

This stage forms the transition phase from the formulation of the manufacturing
strategy to the implementation of it. As actions and decisions are the core of a
strategy, they should be defined within the process in order to ensure the
implementation. The output of this stage is a policy deployment matrix that
relates the objectives to immediate initiatives, targets for these initiatives and
responsibilities.
The last stage consists of three sub-steps:
Set targets and responsibilities
Compose PDM
Agree on policies for project management
Set Targets for this Year

The first step is to define annual targets for any initiative. Taking into
consideration the expertise of manufacturing functions and their resources,
every initiative should be submitted to the responsibility of one single person.
Compose PDM
The PDM, which has been adopted from Baines (2007), is a single document
that relates the actions to the initiatives to the objectives and shows the
responsibilities. Furthermore, the annual targets are related to initiatives.
Finally, the responsibilities for the actions are plotted. This document allows
visualising major contributions as well as minor contributions between the
- 49 -
plotted contents. It enables the project team to easily control the progress and
realise the relationship between the different levels.
Agree on Policies for Project Management
In this step, the main policies for managing the strategy formation are defined in
a similar way as in the process of Miltenburg (1995). This can include the period
for reviewing the actions and the progress. It has to be defined whether it will be
part of an existing meeting or not. Further policies might be resolved. This forms
the last step for the formulation of the strategy before the implementation will be
done on a project basis.
5.5 Chapter Summary

This chapter has applied the theoretical basis, which has been formed in
chapter 4 in order to compose a state-of-the-art manufacturing strategy
formulation process with a strong focus on the practical application of the
process. Taking into consideration the four aspects developed by Platts (1995)
that constitute a strategy formulation process, an operational framework has
been developed. It has been designed to ensure an alignment between
manufacturing and business strategy. The involvement of the manufacturing
function from the beginning of this process ensures the strategic importance of
the manufacturing function to create competitive advantage. After having
designed the operational framework, it has been filled with suitable tools that
guide the formulation of a manufacturing strategy. The process builds partly
upon existing processes for manufacturing strategy with a focus on the works of
Baines and the group of researchers of the Cambridge University around Mills,
Platts and Tan. For vision building and uncovering alternatives, works of Hamel
and Prahalad and decision-making theory have influenced the designed
process. It further combines market-driven strategy approaches with a
competence-based view. In order to achieve this combination, the analysis
stage focuses on the market requirements and a new tool has been designed to
relate the manufacturing objectives to the necessary capabilities, the structured
cognitive map.
- 50 -
Testing of the Formulation Process
6 Testing the Formulation Process

The test of the process for manufacturing strategy formulation will be based on
an industry application. The methodology of testing the process will be
described first (section 6.1). The application of the process will be illustrated
(section 6.2) and the results will be presented (section 6.3). The results will be
discussed in section 6.4.
6.1 Methodology
In order to test the manufacturing strategy formulation process, it has been
applied in practice. For testing manufacturing strategy formulation processes,
Platts et al. (1993) provide three criteria for the evaluation, which will be applied
in this case as well and that have already been applied for the evaluation of
tools and techniques: Feasibility, Usability and Utility. After having carried out
the process, an oral feedback and a questionnaire-based feedback have been
given by the participants of the process. The questionnaire is based on a
scheme in which marks from 1-5 have been given. The above-mentioned
criteria have been broken down into two sub criteria, which are adopted from
Tan and Platts (2003). In the oral feedback, it has been discussed which points
of the process brought good results and where possible improvements might be
introduced.
6.2 Application of the Process

6.2.1 The Company
The company is a rubber-processing company in the automotive sector, based
in northern Germany, which employs about 2,300 people worldwide. The
process has been carried out in one business unit of the company. The
business unit employs about 320 people in one single plant and has an annual
turnover of about 50 million. It manufactures rubber-dampening systems for
Trucks and Taxis and supplies all major producers in Europe with its products
and services.
- 51 -
6.2.2 Conduction of the Process

The process has been carried out by a series of three workshops, lasting from
two to four and a half hours, spread over two weeks. The author acted as the
facilitator. The business level process has been scheduled for one workshop,
whereas two workshops have been agreed upon for the manufacturing level.
For the point of entry, the Managing Director of the business unit has been
approached and a meeting with the Technical Director and another technical
manager has been held. As the company did not have a special issue, the
approach towards the process can be classified as proactive. The company had
already formulated a vision and set broad objectives. Thus, they could be used
as an input for the second stage of the process.
The formed team for the business level consisted of four people: The Managing
Director, the Technical Director, the Sales Manager and the Logistics Manager.
For the manufacturing level, the team was formed of four employees as well:
the Technical Director, the Logistics Manager, the Director of Tool Manufacture
and the Quality Manager.
Figure 10 - Competitive gap analysis1
The process has been applied in German. The illustrated worksheets have been translated
after the application.
- 52 -
Stage 1 has been carried out in a three-hour workshop. The members identified
a competitive gap in the three areas that are related to the strategic dimension
of operations excellence (see Figure 10). This was due to the high cost
pressure in the automotive sector and increasing prices for raw material. Quality
conformance in the process as well as the production costs have been distilled
as the main issues. As the vision and objectives had already been defined, in
stage 2 of the process a consistency check between the analysis results and
the objectives has been carried out.
Figure 11 - Selection and weighting of FACTO criteria
Stages 3 and 4 have formed the second workshop, which lasted four and a half
hours. First, the results of the first two steps have been presented briefly to the
new panel members and found wide acceptance. First, the FACTO-criteria have
been established and ranked to evaluate the initiatives (Figure 11 shows the
selected criteria as well as the weighting).
Design of Tools
Capabilities
Feeding of
autoclave
Qualification
Storage
Maintenance
Process control
Handling
Physis
Supplier management
Vulcanisation of
rubber products
Calendering
Experience of
Employees
Variables
Employees
Material
Production Process
Objective
Tools
Non-Quality Costs of 2,2%
Figure 12 - The structured cognitive map
- 53 -
It has been decided to tackle the quality issue first, because it influences the
costs as well. The qualification of the employees, the vulcanisation process and
the capability of feeding the autoclaves have been identified as the most critical
capabilities by using the structured cognitive map (see Figure 12; the most
critical capabilities are the red ones).
Solutions have been developed and evaluated. The ranking of the six highest
ranked actions can be seen in Figure 13. The red marked initiatives are the
ones that received the highest score in the FACTO-evaluation. These initiatives
should be implemented for the objective of reducing the Non-Quality Costs to
2.2%.
Figure 13 - Ranking of selected initiatives
In the third workshop, the initiatives have been revised and the policy
deployment matrix has been composed. The workshop was mainly concerned
with the responsibilities for the initiatives. The controlling of the actions will be
integrated into an existing meeting.
After having performed the whole process, the oral feedback has been given
and the questionnaires have been handed out and completed.
6.3 Results of the Evaluation

The immediate feedback after the performance of the workshop indicated that
the process followed a logical order and matched the anticipated time. The total
time for running the process has been judged as very short due to a focused
sequence of steps. Stage 4 has been perceived as slightly complicated and it
has been suggested to select the FACTO criteria after having composed the
structured cognitive map. The participant underlined that the composition of the
two teams and the split of the process have been considered as very effective.
- 54 -
The defined initiatives have also been considered as very helpful and new to
the participants.
The questionnaire provided the results shown in Table 3.
Table 3 - Evaluation of the application
The questionnaire results underline the feedback that has been given directly.
The feasibility of the process has been regarded as very high. The timing as
well as the participation received a very good. The clarity of the process has
been marked as very good, but offers space for improvement as well as the
ease of use, which received a good. The utility of the process has been
regarded as very relevant and useful, as both sub criteria have been marked as
good.
Altogether, the process received very high marks and the application has shown
that it allows overcoming some of the shortcomings of existing processes. With
its focused and easy steps, it leads to immediate benefit for the business
practice.
6.4 Discussion of the Case Study

The application of the designed process has generated valuable information
about the developed process for manufacturing strategy formulation. During the
application, the process has shown various strengths, but also minor issues
have been revealed that offer space for improvement.
Taking into consideration the results of section 6.3, the feasibility of the process
is very high. The five steps on the two levels of the company were very concise
and the participants judged it as a very focused process. All workshops have
been held within the scheduled time.
Regarding the usability of the process, the first step and the fifth step have been
perceived as very easy. The selection of the FACTO criteria and the
- 55 -
composition of the structured cognitive map required some explanation, but

were understood and easy to use afterwards. The slightly complicated
beginning was traced back to the short preparation-time for the case study,
during which not all participants had been briefed before the application of the
process. The utility of the process was regarded as high. The outcome of the
process was perceived as very valuable for the company because immediate
actions and responsibilities have been identified in order to improve the
capabilities that are directly related to the objectives.
One of the main weaknesses of the process is that it highly depends on the
facilitation of the process. In stage 3, it is important how the results of the
stages 1 and 2 are presented, as it is important for the next stages to get the
buy-in from the functional team. Furthermore, the composition of the structured
cognitive map requires major facilitation. In case that more than one objective is
defined for the manufacturing function, the fourth stage will require more time.
As the case study company already had a vision and objectives, the second
stage of the process still has to be tested. However, the already formulated
objectives have been congruent with the analysis results.
6.5 Chapter Summary

In this chapter, the process has been tested based on an industry application.
Three workshops spread over two weeks have formed the process that has
been integrated into a hierarchical strategy formulation process. The feedback
obtained by the participants and the perception of the facilitator have shown that
the process is very feasible, usable and useful. It ensures an alignment
between the different strategy levels and focuses on the aspects that are
relevant for the company. Thus, it overcomes some of the limitations of existing
processes. Stage 2 of the process still requires testing and in stage 4, the
selection of the FACTO criteria might be simplified. In order to check the results,
the process has to be applied in different companies with different backgrounds
in order to receive significant feedback.
- 56 -
Conclusion, Limitations and Future Research
7 Conclusion, Limitations and Future Research

In this work, a process for manufacturing strategy formulation has been
developed and tested in one industry application. The literature review has
revealed that less research for the manufacturing strategy process has been
conducted than for the content. Existing formulation processes still show
shortcomings that have been aimed to overcome. Thus, a short process that
demonstrates usability and usefulness had to be created.
The developed process is based on a concise framework for strategy
formulation and incorporates tools from different manufacturing strategy
processes as well as from systems engineering and strategic decision-making.
The process consists of five steps, two on the business level and three on the
manufacturing level. This structure allows aligning the business and the
functional strategies. Problems as well as growth aspirations can be
incorporated into the second stage of the process and will be reflected by the
initiatives, which will be defined in the latter steps. The structured cognitive map
combines the objectives with the capabilities of the company and represents the
core tool for getting from an objective to possible solutions. Using a qualitative
multiple criteria evaluation scheme ensures that different dimensions are
considered and the best solution in the view of the company is selected. The
policy deployment matrix provides all information that is necessary to implement
the formulated manufacturing strategy.
Although the developed process has been designed to work in isolation as well
as being part of a hierarchical process, this still has to be verified. The case
study proved that it can be incorporated into a hierarchical process, but the
tools from stage 2 still have to be tested. The application of the process has
shown that it allows defining initiatives and decisions that are consistent with the
business strategy in a short period. It further proved that the process is feasible,
usable and useful. Thus, a state-of-the-art process has been created that
reflects recent research results and allows an easy and efficient way of defining
a manufacturing strategy. Altogether, the aim and objectives of this work have
been fulfilled.
- 57 -
Conclusion, Limitations and Future Research
Still, the process requires tests in different companies with different contexts in
order to get reliable data that allow a more detailed feedback. Within the tests, it
should be analysed whether the process is applicable for all kinds of context.
Furthermore, the impact of the facilitator on the process outcome should be
analysed and whether a correlation exists between the experience of the
participants with this process and the achieved results. Another possible
direction for research is how the applied formulation process in general affects
the performance of a manufacturing strategy.
- 58 -
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Appendices
Appendices
Appendix I: Overview of Manufacturing Strategy Formulation Processes and Frameworks...........................................................69
Appendix II: Tools and Techniques of Formulation Frameworks ....................................................................................................81
Appendix III: Tools and Techniques of Formulation Processes ......................................................................................................86
Appendix IV: Advantages/Disadvantages for Tools........................................................................................................................92
Analysis Tools .............................................................................................................................................................................92
Tools for Generating Alternatives................................................................................................................................................96
Tools for Evaluating Alternatives.................................................................................................................................................98
Tools for the Implementation Plan ..................................................................................................................................................99
Appendix V: Evaluation of Tools...................................................................................................................................................100
Analysis Tools ...........................................................................................................................................................................100
Tools for Uncovering Alternatives .............................................................................................................................................101
Tools for Evaluating Alternatives...............................................................................................................................................101
Tools for the Implementation Plan ............................................................................................................................................102
Appendix VI: Process Worksheets ...............................................................................................................................................103
Stage 1: Analysis ......................................................................................................................................................................103
Stage 2: Direction Setting .........................................................................................................................................................111
Stage 3: Manufacturing Objectives ...........................................................................................................................................112
Stage 4: Manufacturing Initiatives .............................................................................................................................................113
Stage 5: Policy Deployment ......................................................................................................................................................118
- 68 -
Appendices
Appendix I: Overview of Manufacturing Strategy Formulation Processes and Frameworks

Overview of Manufacturing Strategy Formulation Processes and Frameworks (1/3)
framework/
process
Aim
2006
process
To give guidelines and

recommendations for internal audit
process for integrated strategic
benchmarking
MS
2006
process
Defining manufacturing strategy by

using QFD
MS
2005
framework
Aligning MS and BS combining a

resource based view and market
driven view
process
Formulation of strategic
manufacturing improvements. The
process helps organisations to decide
what they should do, and how they
should do it.
To create an analytical framework that

guides practitioners to identify
Business strategy
appropriate production system
scenarios
Author
Title
Meybodi
Internal MS
audit
MS
Jalham et al.
Improvement of
organizational
efficiency by
developing a
manufacturing
strategy
decision tools
Brown
Strategic
Resonance
Baines
StratNav
Area
MS
Year
2005/
2007
Oram
Thesis
MS
2005
process
Tan/Platts
Effective
Strategic action
planning
MS
2005
process
Describe an interactive action

planning software tool for
manufacturing objective deployment
- 69 -
Inputs
Outputs
Process
Method
of
# of
conducti
stages
on of
stages
2
Review of
competitive
situation
Problem
statement
List of
prioritised
actions
Facilitated
Workshops:
1-3 days in
total
Future
manufacturing
policies and
changes
Action plan
4-5
workshops
that last 2-3
hours
Appendices
Pun
A conceptual
synergy model
of strategy
formulation for
manufacturing
Acur/Bititci
A balanced
approach to
strategy
process
Berry/Hill
Aligning
marketing and
production
strategies with
the market
MS/BS
1999
process
Mills/Platts/Gregory
The
manufacturing
strategy
process:
incorporating a
learning
perspective
MS
1998
process
Menda
The
manufacturing
strategy
process: linking
multifunctional
view
Kim/Arnold
Operationalizing
MS
MS
BS
MS
MS
2004
2004
1997
1996
framework
Develop a synergetic model for

manufacturing strategy using
processes of organisational strategy,
operations strategy and IT-strategy
process
Approach to strategy incorporating

market view and resource-based view
Company profile,
business units,
financial profile,
business
objectives
Action plan
Workshops
Guiding development of marketing

and manufacturing strategy
Necessary
investments
and
developments
to support
market needs
Expert
rounds
Define the manufacturing strategy
Manufacturing
Strategy
(Objectives)
Facilitated
workshops
Over 4
months,
interviews,
discussions
and dataanalysis
process
Uses Hills approach to define

manufacturing strategy
Marketing
strategy
Key tasks for

manufacturing
framework
Define a strategy process in order to

operationalize the competitive
priorities into the choice of
improvement plans - find suitable
improvement plans (e.g. JIT, TQM,
CIM etc.)
Business strategy
Plan for
Objectives
- 70 -
Appendices
Cheng/Musaphir
Theory and
practice of
manufacturing
strategy
Crowe and Cheng
Using QFD in
manufacturing
strategy
planning
MS
MS
1996
1996
framework
process
Develop a process to formulate

manufacturing strategy
Facilitated
workshops
Analyse manufacturing and

developing a strategy for improving it
Project plan
3 formulation
(What &
Why) +
implementati
on plan
(How, When
& Who)
Operating plan
(strategic
initiatives);
Defined
strategy
document
Discussion,
questionnair
es
Definition of manufacturing strategy

using QFD
How to
formulate and
implement a
winning plan
Greenhalgh
Manufacturing
strategy:
Formulation &
Implementation
MS
1991
process
Process to develop and write a

manufacturing strategy and convert it
into reality
Samson
Manufacturing
and operations
strategy
MS
1991
process
Develop a manufacturing strategy
Platts et al.
Manufacturing
audit in the
process of
strategy
formulation
MS
1990
process
Formulate MS with the help of several

audits
Hill
Manufacturing
strategy
MS
1989
framework
Linking manufacturing decisions with

marketing strategy
1995
process
Corporate and
business strategy
(But defined
within the 6 step
process)
Manufacturing
initiatives,
tactical
policies and
detailed tasks
Miltenburg
MS
6 Steps (9
sub-steps)
- 71 -
Marketing
strategy
Action plan
(Objectives)
Manufacturing
policies
Using
worksheets
in facilitated
workshops
Appendices
dti
Competitive
manufacturing:
a practical
approach to the
development of
a manufacturing
strategy
MS
1988
process
Audit manufacturing strategy and

develop a new one
Fine/Hax
Manufacturing
strategy: A
Methodology
and an
Illustration
MS
1985
process
Design of manufacturing strategy and

align it with the corporate strategy
MS
1978
framework
Hayes/Wheelwright
Skinner
Manufacturing
policy
determination
MS
1969
framework
Manufacturing
policies
Business strategy
All
specialists of
the
management
team
6 steps
Top-down
process
4 steps
Define a manufacturing strategy
framework (policies) and involve
manufacturing into the total process of
strategy formulation by the help of
feedback loops
- 72 -
Manufacturing
policies
7 that can be
split into 15
sub-steps circular
process
Top-down
decision
making - not
clearly
specified
Appendices

Year
Stage 1
What?
Stage 2
What?
Meybodi
2006
6 steps
* Market Analysis, Benchmark Environment,
Benchmark global Strat.
*Benchmark corporate strategy
*Benchmark Competitive Priorities
*Benchm. Manufac. Performance Objectives
*Benchm. manufacturing Action Plans
*Critical Process to Benchmark
Apply appropriate product, process or bestpractice to critical process
Jalham et al.
2006
QFD like Crowe
Brown
2005
Identify and develop manufacturing capabilities,

related to people, process, product and network
Increase senior executive awareness of man.

Capabilities in the process
Increase the involvement and influence of

man. Executives in the strategic process
Baines
2005/
2007
Confirm company's competitive strategy, gap

between current and desired sit. and problem def.
Generate set of key criteria to assess activities
Generate activity landscape and identify

activities that influence most KDC
Oram
2005
Determine manufacturing objectives and

performance measures
Selection of Production System Type
Determine policies for manufacturing

decision areas
Tan/Platts
2005
Build a model of the problem situation
Generate action plans
Evaluate action plans
Pun
2004
Strategy audit stage
The strategy formulation stage (generate action

plan and accompanying procedures)
The strategy execution stage
Acur/Bititci
2004
Strategy formulation (consolidation of BUs; position

each BU against each other; formulate business
process strategies for each Unit; develop
consolidated operations development)
Strategy implementation (deploy objectives and

plans into actions and validate them)
Strategy review (compare plan vs. Desired

future status and objectives)
Berry/Hill
1999
Examining marketing's view of the world (customer

analysis, product analysis)
Establishing customer requirements (order

qualifiers and winners
Checking manufacturing performance (for

customers, against key performance
measures)
Author
- 73 -
Stage 3
What?
Appendices
What is our current manufacturing

strategy?
* strategy charting
*realised strategies per policy area (past
actions and decisions in facilities, capacity,
span of process, processes, HR, Quality,
Control policies, Suppliers, New Products)
*planned strategies
*identify mode of strategy formation
(planned or emergent)
1998
Grouping Products
* based on competitive requirements
* choose one group first
What are the objectives for our business?

* market analysis (current and future analysis of
customer req. in terms of product features, design
flexibility, quality, delivery lead time, delivery
reliability, volume flexibility)
* stakeholder requirements
* define objectives
Menda
1997
Define corporate mission
Analysis of marketing plan
Establish functional views (position of

product on life-cycle, determine order
winning criteria)
Kim/Arnold
1996
Identification of competitive priorities (cost, quality,

flexibility, delivery) based on the business strategy
(cost leadership vs. Differentiation)
Establish manufacturing performance targets define manufacturing objectives by defining

measurements for competitive priorities
Selection of the correct improvement

programmes in order to fulfil targets and
match competitive priorities - identify
implications of improvement programme on
measurements
Cheng/Musaphir
1996
Analyse competitive situation (product per market)
Analysis of company's skills and resources
Formulation of strategy
1996
Define the business environment

* identify market segment
* order winning criteria
* competitors' status
* determine corporate and business strategy
functional strategy formulation

* using QFD, input business strategies,
interactions and functional strategies
* output, importance of MS strategy in comparison
to others
Manufacturing priority formulation
Analyse current status

*Volume/Process *Analyze capabilities (range from
1-4) for Man. Levers (HR, Structure, Production
Planning & Control, Sourcing, Process Technology,
Facilities)
Identify desired future status

*competitive analysis (Delivery, Costs, Quality,
Performance, Flexibility, Innovativeness)
* define measurement per criteria*
define company status, industry average, and
strong competitor
* establish order winning/market qualifying criteria
out of comp. crit
* set targets and identify match between
productions system and manufacturing outputs
Generate targets on how to achieve the

desired status*
necessary changes to production system*
targets for Order-winning - market qualifying
criteria
* take into consideration capabilities of
manufacturing
Crowe/Cheng
Miltenburg
1995
- 74 -
Appendices
Kerr/Greenhalgh
Samson
1991
Core Analysis of the company,

* competitive stance - identify market segments &
competitive option (cost leadership/differentiation),
key success factors for manufacturing (NPI, Access
to key decision making, Product performance,
Technology Leadership, Delivery Service)
* SWOT for manufacturing
* Internal Trends and Events - past strategies,
current performance, expected performance (What
has changed over time?, What must be changed)
* External Trends and Events - PEST (rate of
change, current situation, strategic impact)
* Stakeholder Analysis (What are the expectations
of the interested parties)
* Production Performance criteria & analysis - Cost,
Quality, Reliability, Flexibility (Indicators per criteria
and how should it be - current situation)
* Scenario building
Further Analysis / Synthesis

* Technology - develop strategic technology plan
* Lessons from the past - rules, assumptions on
how we work etc.
* manufacturing Infrastructure - impact of policies
on manufacturing outcomes - identify consistent
actions)
* Cross-functional Synergies - Information
required from manufacturing and relationship to
functions
* contribution of Shop-Floor - problems, what
should we do, constraints
* Plant location, Capacity and the Link with
logistics - geography of customers and suppliers,
configuration of plant, impact on location and
capacity on company performance and key skills
available, industry capacity, competitor
configurations, specific uncertainties
* distilling key issues - identify operational and
strategic issues
* confront mission statement
Operating plan (basic assumptions, strategic

initiatives, expectations)
1991
Where are we now

* strategic manufacturing overview (rank
statements about the existing strategy from 1-5)
* policy audit (Description, Strengths, Weaknesses,
importance of decision category from 1-5 for
Capacity, Location, Technology, HR, Material,
Production, R&D, Quality, Span of process, supplier
interfaces, New products, other)
* Competitive criteria (cost, quality, delivery,
flexibility, volume variability, innovation, service) manufacturing ranks Importance and
Capability/Performance, Marketing Importance and
Performance
* product/process matrix
* per product identify sales, profit, market
requirements and capabilities
* focus analysis (product, process, process type,
Technology, Facility, HR, Market)
Creating a vision
* role of manufacturing in future - discuss with
different managers with the help of 18 leading
questions
Getting from here to there

* change management practices and decide
whether pilot, full-range implementation etc
- 75 -
Appendices
Platts et al.
Hill
dti
Fine/Hax
Specification of the manufacturing objectives

* criteria that are consistent with business strategy
* objectives that manufacturing can influence
* select product families
* market audit (order winning criteria, size/growths
of the market)
* competitor audit (how competitors perform in
order winning criteria)
Formulation of the MS
* compare performance against objectives (identify
gap)
* existing practice audit (use 9 areas of
Wheelwright) - describe desired and current policy
- opportunities and threats per policy
* generate alternative policies
* choose between alternatives
1989
Define corporate objectives

e.g. profit, survival, growth, employment policies,
environmental issues
Determine marketing strategies to meet these

objectives
* Product Grouping
* current and future volumes per group
* end-user characteristics
* industry practices and trends
* key competitors and view of businesses and
relative position
* identify market targets and agree on objectives
for each market
Assess how different products win orders

against competitors
* identify order winning and market qualifying
criteria
* per criteria
.market data (sales volumes expected for
future)
.criteria for weighting (cost, quality, brand
name, design, delivery) today and in future
* other functions test these criteria
1988
Understanding market position

* market requirements vs. Performance in cost,
quality, delivery lead-time, reliability, features,
flexibility design, volume
* life cycle
* basic product family data market share/market
size, number of competitors
* competitive edge (100pts per for criteria above)
* future expectations (market forces; SWOT per
product group)
Assessing your manufacturing operation

* Assess per policy area (Facilities, Capacity,
Span of Process, Processes, HR, Quality, Control
policies, Suppliers, New Product) current practice
and importance in terms of cost, quality, delivery,
flexibility - does policy support performance of
criteria
Developing new strategy

* importance of product family for business
and performance (contribution, growth
potential of market share or market, strength
of position, compare market requirements
with actual performance, derive necessary
policies per area, identify possible actions))
Identify manufacturing requirements derived from

higher-level strategies
Initial MS audit
* Strengths and Weaknesses of 9 decision areas
(Wheelwright 1984)
* competitive standing for each major product
according to 4 measures (cost, delivery, quality,
flexibility -100pts)
Product Grouping
* on product/process/lifecycle matrix OR
* sharing similar competitive success
requirements
* market data on product group
. Market growth/share
. Lifecycle status
1990
1985
- 76 -
Detailed MS design
*layout
*detailed procedures
Appendices
Hayes/Wheelwright
1978
Define SBU
Skinner
1969
Analysis of competitive situation (# and kind of

competitors and how they are competing (products,
markets, policies, channels of distribution)
- 77 -
Define competitive criteria

* allocate 100 pts for cost, quality, delivery,
flexibility
* define measurement per criteria
Identify historical and required priorities

* allocate points again for past, now and in 2
and five years
Critical appraisal of company's skills and resources

as well as facilities and approaches
Formulation of the company strategy (where

to compete, opportunities, formulate
advantages)
Appendices
Stage 4
What?
Stage 5
What?
2005/2007
Identify capabilities which impact most on

KDC
Check previous stages

& identify immediate
activities
Oram
2005
Assess proposed manufacturing policies

against existing capability
Tan/Platts
2005
Pun
2004
Acur/Bititci
2004
Berry/Hill
1999
Author
Year
Meybodi
2006
Jalham et al.
2006
Brown
2005
Baines
Comparing manufacturing strategy to actual

performance (check investments,
developments)
Developing strategic
issues and
recommendations
Navigating towards
our business
objectives
*reveal potential
options
* identify those who
can close gap
1998
Can Current strategy achieve our

business objectives?
*assessment whether planned strategies can
achieve objectives
Menda
1997
Structural and infrastructural decisions
- 78 -
Stage 6
What?
Making it again and

again
Stage 7
What?
Appendices
Kim/Arnold
1996
Cheng/Musaphir
1996
Define implications in terms of manufacturing

tasks
Constraints/limitations
Make/buy, #of plants
Crowe
1996
Action plan formulation
Detailed task
formulation
Feedback and
revision
Miltenburg
1995
Identification of projects (per lever, set

course, aim and identify projects over time
and prioritise them)
Kerr/Greenhalgh
1991
Samson
1991
Platts et al.
1990
Implementation of the system
Operation of the
system
Hill
1989
Establish most appropriate mode to

manufacture sets of product/process
choice
* span of process
* technology
* product/process
* plant focus
Provide
manufacturing
infrastructure
required to support
production
* structure
* system
dti
1988
- 79 -
Appendices
1985
Assess degree of focus at each plant

* product/process matrix for each line within
each plant
Hayes/Wheelwright
1978
Identify major operations decisions

* decisions in areas (Facility, Choice of
Process, Capacity, Vertical Integration,
Infrastructure, Other Functions)
* Evaluate options using the required
priorities
Skinner
1969
Define implications of the strategy for

manufacturing in terms of cost, quality,
delivery, lead times, reliability
Fine/Hax
Development of MS
* broad action
programmes for each
of the 9 categories * detailed programme
for each of the broad
ones
- 80 -
Constraints of
business and
Technology
Synthesising all prior

steps into Manufact.
Policies
Programmes of
implementation,
systems, controls and
review procedures
Appendices
Appendix II: Tools and Techniques of Formulation Frameworks

Tools and Techniques of Formulation Frameworks (1/2)
Skinner (1969)
Hayes/Wheelwright
(1978)
Hill (1989)
Anderson
(1991)
Kim/Arnold
(1996)
Analysis
Capabilities
Fit
Focus
Manufacturing
Performance
Company
Approach per policy

area
Group and market

volume/growth
Product Grouping
*ROE
*financial
performance
Performance
Strategic Fit
Deploy higher
strategy into
competitive criteria
Include
manufacturing into
formulation process
History
Future
Network
- 81 -
Business strategy integrated

formulation process
Priorities derived
from business
strategy
Appendices
Skills/Resources
Technology,
organisational,
social, human
Critical appraisals
Environment
Competitor
*Number and kind of

competitors
*how are they
competing
Identify key
competitors and
relative position
Industry
Market
100 pts for competitive

criteria
*End-user
characteristics
*order-winner and
market qualifier
*market volume
today and future
Global Environment
Customer
requirements
Competitive
priorities
PEST
Direction Setting
Vision
Objectives
Competitive priorities in
the future
*Define corporate
objectives
*identify market
targets and agree on
objectives per
market
Establish
manufacturing
performance
targets
Uncovering Alternatives
No Alternatives (breaking-down process)
*Establish mode of
manufacture per policy
(structural infrastructural)
Various Alternatives
Possible decisions per

policy area
- 82 -
Select improvement
programme
Appendices
Evaluating
Alternatives
Use future competitive
priorities
Implementation
Deployment
Define Actions
Programmes of
implementation
- 83 -
Appendices
Tools and Techniques of formulation frameworks (2/2)

Pun (2003)
Grant (2002)
Brown (2005)
Liedtka (2006)
Analysis
People, process, product,
network
Capabilities
Fit
Manufacturing
Focus
Performance
Product Grouping
Segmentation
Analysis
Performance
Include manufacturing in
formulation process
Strategic Fit
Company
History
Future
Network
Skills/Resources
Supplier/Customer/Competitors
*Tangible,
Intangible, HR
*Value Chain
activities
- 84 -
Capabilities
Capabilities
Appendices
Industry
Environment
*Industry
attractiveness
* 5 forces
*complement
products additional
to 5 forces
Competitor
Competitor
behaviour analysis
Market
Buyer
characteristics per
segment and key
factors
Global Environment
Direction Setting
Create desired
future
Vision
Objectives
Uncovering Alternatives
Evaluate Alternatives
Implementation
Which capabilities
are important to
close gap between
today and desired
future
Deployment
Define actions
- 85 -
Appendices
Appendix III: Tools and Techniques of Formulation Processes

Tools and Techniques of Formulation Processes (1/2)
Fine/Hax (1985)
dti (1988)
Platts et al.
(1990)
Kerr/Greenhalgh
(1991)
Samson (1991)
Miltenburg
(1995)
Analysis
Capability per
Product/process
matrix
Capabilities
Fit
Focus
Manufacturing
Performance
Company
Product/process matrix
for each line per plant
Rank per lever

Volume/process
Focus analysis
Assess per policy

*Compare
*SWOT for
area current
performance against
manufacturing
*Policy
practice and effect
manufacturing
Strengths and
*product
strengths/weaknesses
in terms of
objectives
performance
weaknesses of 9 policies
and importance)
competitive criteria,
*describe current
analysis (competitive
*competitive criteria
does it support
policies and desired
criteria)
direction
policies
Product Grouping
*Process/product/lifecycle
OR shared competitive
criteria
*market data per group
Market
share/growth per
major product
group
Performance
Competitive standing per

product group
*Competitive
priorities
*chosen
competitive edge
Strategic Fit
Identify man.
requirements from higher
level strategies
Select product
families
Competitive criteria
Use business
strategy as input
- 86 -
Identify market
segment and
competitive option
Appendices
History
Past strategies
Future
Build scenarios
Network
Skills/Resources
Environment
Competitor
Size and number of

competitors
How do competitors
perform against
order-winning
criteria
Identify competitor
situation
Market
*Competitive
priorities
*future market
forces
Order
winning/market
qualifying and
market data
Power of suppliers
and customers
Industry
Competitive requirements
*Competitive criteria
*identify sales, profit,
requirements and
capabilities
Order
winning/market
qualifying
*External trends and

events
*stakeholder
analysis
Global Environment
Direction Setting
Discuss with the help

of lead questions
future status of
manufacturing
Vision
Objectives
Gap between importance

and performance of
competitive priorities
Gap between
performance and
importance and
future
Uncovering
Alternatives
- 87 -
Derive
manufacturing
related objectives
from business
strategy*
*Process/volume
mix
* targets per
Appendices
Derive necessary
policies
Generate alternative
policies
Evaluating
alternatives
Implementation
Detailed design
derived from chosen
policies
Deployment
Define Actions
Define action
programmes for policy
area
Identify possible
actions
- 88 -
Distil key issues
Define operating
plan
Identify actions in
order to adjust
production system
and changes in
order winning
Appendices
Tools and Techniques of Formulation Processes (2/2)
Crowe (1997)
Menda (1997)
Mills/Platts
(1998)
Berry/Hill (1999)
Acur/Bititci
(2004)
Baines
(2005/2007)
Lifecycle
Shared competitive
criteria
*Competitive
positioning
*market profiling
*SWOT
Business objectives
and mission as input
*Consolidation
*Value proposition
Analysis
Capabilities
Fit
Focus
Manufacturing
Performance in order
winners
Performance
Company
Product Grouping
Based on
competitive priorities
Market segments
Match between
strategies and
business objectives
Performance
Strategic Fit
Market segmentation
*Corporate and
business strategy as
input
*fit between
functional strategies
via QFD
Use corporate
mission and
marketing strategy
Strategy chart
(intended and
emergent strategies
per policy area)
History
Future
Network
- 89 -
Strategy chart
Appendices
Skills/Resources
Environment
Industry
Competitor
Competitors' status
in order-winning
criteria
Market
Order-winning
criteria
Order winningmarket qualifying
Stakeholder
requirements
Global Environment
Direction Setting
Vision
Define business
objectives
Objectives
* Derive from
business strategy
* gap between
business strategy
and performance
Business objectives
*Issue statement
*Competitive gap
Uncovering
Alternatives
No Alternatives
Distil strategic issues
Reveal strategic
options
Alternative actions
Identify impact on
business strategy
Impact analysis
Evaluating
Alternatives
- 90 -
Appendices
Implementation
Deployment
Manufacturing
priority formulation
BU objective
deployment
Activity landscape
Define actions
Action plan
formulation/task
formulation
Strategy action
planning
Results of impact
analysis
- 91 -
Appendices
Appendix IV: Advantages/Disadvantages for Tools

Analysis Tools
See: Kerth/Ptmann (2005)
Analysis Tools
Output
Pros
Cons
Environmental Analysis
PEST
Stakeholder Analysis
- Influencing forces outside the

industry
- External Trends and Events
- Drivers that indicate External
Trends
- External factors that

significantly influence the
business and are often
neglected are systematically
monitored
- A vast amount of information

- Danger of wrong interpretation of
information
- Expensive and time consuming to
analyse all critical factors
- Requires other analysis
techniques, e.g. market or
competitor analysis
- Identify most important and

influencing Stakeholder for company
success
- Opportunities and risks for the
company
- Involvement of stakeholders
in the strategic planning
process
- Take Advantage of
opportunities that evolve out of
the management of
stakeholders
- Social responsibility can be
performed
- Complex decision-making process

- Often most powerful stakeholder
groups prevail
- Danger of decision based on a
huge compromising process
- Potential and opportunities of the

business of the company
- Factors that influence competition
- Forces that lead to threats
- Recognition of industry
influencing factors
- Evaluation of influences as
input for strategic direction
setting
- Well structured analysis
- Requires further analysis

- Complete analysis is time
consuming
Industry Analysis
5-Forces
- 92 -
Appendices
Competitor Analysis
Benchmarking
Customer Analysis
- Competitors and their market share

and position
- Competitors' portfolio
- Competitors strengths/weaknesses
and expectations
- Clear overview of the basis

facts of competitors and the
market
- Could be done from very
easy/quick analysis to
complex, detailed analysis
- Further analysis required

- Results are open to interpretation
and misinterpretation
- Data not always correct
- Company's position in comparison

to best-practice competitors
- Identification of best-practices
- Process that need to be optimised
- Easy way to position

company in the market
- Products and processes can
be compared
- Reflection of best-practice
process on the company
- Huge amount of data needs to be

collected
- Danger of copying process and
neglecting innovation
- If no competition-benchmarking
transferability and comparability of
process can be difficult
- Definition of customers and their

requirements
- Competitive priorities
- Market oriented strategy can

be developed
- Sometimes no clear definition of
- Different approach to different
customer requirements possible (if
customers possible
done by management)
- Customised customer
approach possible
- Prioritization of products
- Necessary focus
- Levers for success
- Easy to use
- Efficient use of Resources
- Method could be applied
within different topics
- Concise
- Data needs to be consistent

- Just mathematical (optimisation
potential maybe not in category A)
- Future potentials and threats not
reflected
- Source for product profiling

decisions
- Future potential of a product
can be identified
- Phases can be influence and thus

gives restricted information
- Lengths of phases depend on the
industry
- Some product groups have
different phases and do not follow
the standard approach
Company Analysis
ABC-Analysis
Lifecycle - Analysis
- Opportunities for a product group

- Leads to expectations for sales
- 93 -
Appendices
- Current product portfolio of the

company
- Hints for investment in product
groups
- Easy model
- Easy way of obtaining data
- Clear visualisation
- Relationship between market

share and profit is questionable and
has lead to bad results
- Segmentation of products might be
problematic
- Market share/market growth too
simplified
- Ranking of different factors
- Transparent
- Possible to conduct in a
group
- Qualitative and quantitative
data can be used
- Traceability
- Problem, if criteria have

interrelationships
- No real objectivity
Value Chain Analysis
- Processes that create value

- levers for competitive advantage
- Complete reflection of the

system as a value chain
- Identifies activities that create
value
- Extensive analysis of
competitive advantage
- Enhances understanding for
processes
- Very complex in diversified

companies and processes
- Time consuming
- Allocation of costs to activities can
be problematic
- Data from competitors is hard to
obtain
Value Proposition
- Focus for strategy
- Gives focus for development

- Can be done within a group
- Is based on trade-offs
Core Competencies
- Sources for competitive

advantage can be identified
- Competencies that created value in
and strengthened
the past
- Core competencies can be
- Competencies that can create value
transferred to new markets
in the future
- Concentration on competitive
advantage
Cultural Analysis
- Values of the company

- How the culture can support the
vision or mission
Portfolio Analysis
Scoring Techniques
- Identification of core competencies

is very complex
- Identification mostly only possible
ex post
- Provides basic values that

- Complex data collection
determine company's success
- Values of the company are hard to
and hints for implementation of
change
the strategy
- 94 -
Appendices
- Past intended and emergent

strategies
- Failed strategies
- Visualises past strategies

- Easy to use in a team
- Maps what worked and what
did not work
- Correlations between 7S
- Fit of the 7S
- Gives impression of company

and provides basis
- Clear structure of the analysis is
- Can be connected with other
not defined
models for each S
- "Fit" is hard to define
- Takes into consideration
correlations of the factors
Scenario-Techniques
- Possible future situation on the

basis of the current situation and
contextual factors
- Using scenarios, the

correlations between company
and context are shown
- Scenarios present possible
futures and thus it anticipates
and defines future actions
- Data collection is very complex

and time-consuming
- hard to operationalise
SWOT
- Strengths and weaknesses of the

company
- External threats and opportunities
- provides standard strategies
- Clear visualisation
- Can be done in group
- Reduction of complexity
- Trends can be anticipated by
periodical use
- Just analysis, does not give hints

for action
- Opportunities and threats are
sometimes hard to distinguish
- Correlations between internal and
external factors are not clear
Strategy Chart
7S-Model
- 95 -
- Does not give clear direction for

the future
Appendices
Tools for Generating Alternatives

See: Proctor, 2005; Franke, 1998; Daenzer and Huber, 2002; Tan and Platts (2003)
Generating Alternatives
Structuring the problem
Output
- Root-causes of one problem
Fishbone-Diagram
- Influencing factors of different

perspectives
- Root-cause of a specific problem
Why/Why
- Casual tree with different levels of

abstraction
Decomposable Matrix
Pros
- Use of different perspectives
- Breaking-down process
- Detailed break-down of the problem

- Broken-down system into sub-
- Structures the problem clearly
systems
- Shows influence of factors
- Influencing factors for one central - Uses both sides of the brain
Cognitive Mapping
Influence Diagrams
aspect
- Relationship between different factors can
- Association and relation of
be plotted
aspects
- Complex problems can be plotted
- Dynamic model of a problem and

its influencing factors
- Dynamic model
- Way and strengths of influence
- Shows possible levers
- 96 -
Cons
- No interrelationships between perspectives
- Complex problem hard to plot
- Static
- Possibility of "stuck-in-the-detail"
- Complex problem hard to plot
- Static
- Just for very structured problems
- Hard for complex problems
- Static
- No strength of interrelationship
- Can be complex
- Static
- Hard to define boundaries

- Can be very complex
Appendices
Creative Tools
Output
Brainstorming
- List of unstructured ideas
Brainwriting
- List of unstructured ideas
Pros
Cons
- Huge amount of ideas
- Complex process for selection and evaluation of ideas
- No barriers by discussion
- Not suitable for complex problems
- No barriers by discussion and focus

- Uses input from whole group
- Same as brainstorming
- Suitable for new solutions

- Use of analogies and unnormal
Synectics
- List of ideas and analogies
solutions
- Hard to perform
- Requires experience of the group members
- Combines systematic and intuitive

elements
Problem-Solution-Tree
- Systematic broken-down solutions
- Structures the solutions

- Easy to evaluate
- 97 -
- Does not use multiple perspectives

- No creative step between problem and solution
- Hard for complex problems
Appendices
Tools for Evaluating Alternatives

Evaluating Alternatives
Output
Pros
Quantitative
- High value of data

- Based on "hard-facts"
- Fast
- Easy to use
- Further Analysis
necessary
- No weighting of
advantages and
disadvantages
- Merit of alternatives
- Ranking
- Easy to use
- Decision is transparent
- Just one perspective

- Very simplified eval.
- Merit of alternatives
- Ranking
- Easy to use
- Decision is transparent
- "Soft" and "hard" facts
can be combined
- Different perspectives
can be applied
- Value of data lower

than for quantitative
evaluation
- Partly based on feeling
and assumption
- Ranking or decision for

alternative
- Very fast
- Low value of data

- Decision is
intransparent
- New data
Qualitative
- List of advantages and

(Advantage/Disadvantage) disadvantages
Qualitative (one criterion)
Qualitative (multiple
criteria)
Subjective
Cons
- Needs further
interpretation
- Time-consuming
based on Nutt (1998)
- 98 -
Appendices
Tools for the Implementation Plan

Output
PDM
Project Plan
Operational Plan
Implementation
Pros
Cons
- Very easy to control (1

document)
- Very concise
- No timeline
- Detailed information
available
- Easy to control
- Visible controlling
- Multiple documents
- All policies included

- Quantity of information
- Hard to control
- Complex document
- Hard to produce in a group
- 99 -
Appendices
Appendix V: Evaluation of Tools

Analysis Tools
Product
Feasible
for
workshop
1
Ease of
use
3
Expected
value of
data
1
Industry
5-Forces
Competitor Analysis
Benchmarking
Customer Analysis
1
1
0
1
1
5
3
5
3
3
3
5
3
15
0
25
0
1
0
1
5
5
5
5
1
1
1
3
0
5
0
15
Company
ABC-Analysis
Lifecycle Analysis
Portfolio Analysis
Scoring Techniques
Value Chain
Analysis
Value Proposition
Core Competencies
Cultural Analysis
Strategy Chart
7S model
Scenario
Techniques
SWOT
0
1
1
1
1
1
1
5
3
1
5
1
5
5
3
3
1
3
0
25
9
3
5
3
0
1
1
3
5
3
0
9
1 = hard
5 = easy
1 = low
5 = high
PEST-Analysis
Environment StakeholderAnalysis
Explication
0 = No
1 = Yes
- 100 -
Appendices
Tools for Uncovering Alternatives
Product
Feasible for
Ease of
workshop conduction
Expected
value of
data
Fishbone-diagram
Why/why
Decomposable matrix
Influence diagram
Cognitive map
1
1
1
0
1
1
5
2
3
5
3
3
3
3
5
3
15
6
0
25
Brainstorming
Brainwriting
Problem solving
Synectics
Problem-solution tree
0
1
0
1
5
5
5
5
1
1
1
3
0
5
0
15
Problem
Structuring
0 = No
1 = Yes
Explication
1 = hard
5 = easy
1 = low
5 = high
Tools for Evaluating Alternatives
Quantitative
Feasible
for
workshop
0
Ease of
use
3
Expected
value of
data
5
Advantage/disadv.
Single criterion
Qualitative
Multiple criteria
Portfolio of real options
1
1
1
1
5
5
4
2
2
2
4
4
10
10
16
8
Subjective
10
Explication
0 = No
1 = Yes
1 = hard
5 = easy
- 101 -
1 = low
5 = high
Product
Appendices
Tools for the Implementation Plan
Product
Implementation
Feasible for
workshop
Ease of
use
Expected
value of
data
1
1
1
5
3
2
5
5
3
Policy Deployment Matrix

Project Plan
Operating Plan
Explication
0 = No
1 = Yes
- 102 -
1 = hard
5 = easy
1 = low
5 = high
25
15
6
Appendices
Appendix VI: Process Worksheets

Stage 1: Analysis
WORKSHEET 1a
business area for review
Brief but clear description
of
the
part
organisation
of
the
under
consideration.
(needs to include product,

market and distinguishing
factors)
Data of this field
(Turnover, market share,
market
growth,
contribution)
- 103 -
Appendices
WORKSHEET 1b
(Source: Baines, 2007)
Current Competitive strategy

Consider how each of following statements applies to your current approach to business with main
products and customers. Tick the appropriate column for each statement (Agree, Disagree, Dont
Know)
STATEMENT
AGREE
Our core processes are invention, commercialisation and market exploitation

We achieve a low cost position on product and service support
Our focus is on flexibility and agile manufacturing
We offer great prices and quality
We frequently review our product portfolio
Consumers ask for our product by name
We are experts in our customers business
We are always on the lookout for new product ideas
Our core processes are end-to-end product delivery and customer service cycle
Important improvement levers for us are process redesign and continuous improvement
Our services provide exactly what our customers need
We have regular meetings to plan for future customer needs
Our products are premium priced, but worth it
We believe in solving the clients broader problem
We build a better product, for which customers will pay more
Our company is recognised as a provider of leading products
We understand (can quantify) how changes to our service offer will benefit our customers
We believe that variety kills efficiency
Our products last and last and last
Our company is recognised as a provider of best total cost
Important improvement levers for us are problem expertise and service customisation
We believe in cannibalising our success with breakthroughs
We are a no-hassle firm
Our core processes are client acquisition and development, and solution development
We actively pursue lean and six sigma manufacturing capabilities
Consistency is our middle name.
We actively collect performance feedback from our customers
Our company is recognised as a provider of best total solution
Its important for us to know whats hot and whats not
Important improvement levers for us are product technology, time to market and R&D cycle time
- 104 -
DIS-
DONT
AGREE
KNOW
Appendices
WORKSHEET 1c
Desired Competitive strategy

Consider how each of following statements applies to how your company should be doing business
in the future with main products and customers. Tick the appropriate column for each statement
(Agree, Disagree, Dont Know). All may be important, but try to identify the key levers.
AGREE
Our core processes need to be invention, commercialisation and market exploitation

We need to achieve a low cost position on product and service support
Our focus needs to be on flexibility and agile manufacturing
We need to offer great prices and quality
We need to frequently review our product portfolio
Consumers should ask for our product by name
We need to be experts in our customers business
We always need to be on the lookout for new product ideas
Our core processes need to be an end-to-end product delivery and customer service cycle
Important improvement levers for need to be process redesign and continuous improvement
Our services need to provide exactly what our customers need
We need to have regular meetings to plan for future customer needs
Our products need to be premium priced, but worth it
We need to be solving the clients broader problem
We should build a better product as our customers will pay more
Our company should be recognised as a provider of leading products
We should understand (can quantify) how changes to our service offer will benefit our customers
We need to all understand that variety kills efficiency
Our products need to last and last and last
Our company should be recognised as a provider of best total cost
Important improvement levers for us will be problem expertise and service customisation
We should be cannibalising our success with breakthroughs
We need to be seen as a no-hassle firm
Our core processes should be client acquisition and development, and solution development
We should actively pursue lean and six sigma manufacturing capabilities
Consistency should be our middle name.
We should actively collect performance feedback from our customers
Our company should be recognised as a provider of best total solution
It will be important for us to know whats hot and whats not
Important improvement levers for us will be product technology, time to market and R&D cycle time
- 105 -
DIS-
DONT
AGREE
KNOW
Appendices
WORKSHEET 1d
Individual score sheet for Worksheets 1b and 1c
* Put a tick in this column against all those statements that you ticked as
AGREE on Worksheet 1b (your current approach to business)
** Put a tick in this column against all those statements that you ticked as
AGREE on Worksheet 1c (how the company should be doing business in
the future)
Statement
strategy indicator
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
1b
1c
Current*
Future**
Add your number of Cs, Os, Ps for each column and enter in the Table
below
Current scores
No. of Cs
No. of Os
No. of Ps
Future scores
No. of Cs
No. of Os
No. of Ps
- 106 -
Appendices
Worksheet 1e Aggregate strategy scores

CUSTOMERS
Current
Desired
OPERATIONS
Current
Desired
PRODUCTS
Current
Desired
45
45
45
40
40
40
35
35
35
30
30
30
25
25
25
20
20
20
15
15
15
10
10
10
- 107 -
Appendices
Competitive gap:
Worksheet 1f competitive gap
Customer requirements/company performance
0
1
2
3
After-sales support
Product price
Quality conformance
Product attributes
Time to market
New product introduction rate
the customer requirements will be plotted in red (O = no importance; 5 = very
important)
The company's performance will be plotted in green
Worksheet 1g competitive gap

Company performance/competitor performance
0
1
2
3
After-sales support
Product price
Quality conformance
Product attributes
Time to market
New product introduction rate
The company's performance will be plotted in green
The competitors performance will be plotted in blue
- 108 -
Appendices
WORKSHEET 1h
Critical performance gaps

Desired competitive strategy identified in Section 1.2:
Performance
Competitive
Performance
Is the performance gap
lagging
strategy
lagging
critical?
indicator
competitor
behind
customer
behind
requirements
performance
Is it threatening your
**
competitive strategy?
Service
Customer
customisation
Intimacy
Product
Customer
customisation
Intimacy
After-sales
Customer
support
Intimacy
Product
Operations
availability
Excellence
Product price
Operations
Excellence
Quality
Operations
conformance
Excellence
Product
Product
attributes
Leadership
Time to market
Product
Leadership
New
product
introduction rate
Product
Leadership
*Any in this column that are less than 0 MAY be critical

**Those which DIRECTLY address the competitive strategy are most critical
- 109 -
Appendices
DESCRIPTIONS OF CRITERIA (source: Baines, 2007)
Service customisation. Some products sell because the producer is able to offer
a tailored service package to customers. The customisation can cover all aspects
such as pre-sales activity to understand and meet individual requirements; tailored
delivery service such as frequency, volume and packaging.
Product customisation. Some products sell because they suit an individual
customers specification. These include both one-offs, and standard products
which have a standard design but which require modification for a particular
application. This could also be called design flexibility.
After-sales support. This can include technical support, training, repairs and
supply of spares. The range and quality of after-sales services may be critical both
in obtaining sales, and in achieving customer loyalty.
Product availability. This means the supply of a product to a customer on or
before the quoted delivery date. In the case where your customer is a consumer,
this may mean on-shelf availability. Associated measures are lead-time and
delivery reliability.
Product price. For some customers, value for money is paramount. In this case,
their consideration is of the total cost of purchasing products from you. This total
cost will include purchase price as well as other costs of doing business with you,
such as time and convenience.
Quality conformance. This means both conformance to specification (the product
performs as specified) and reliability in use (the product continues to perform for
an extended period).
Product attributes or features. A product may sell because it has some feature
that is not available from competitors (latest or unique technology perhaps), or
because its performance in a particular feature is superior to its competitors.
Time to market. A product may sell because of the speed with which it can be
developed. This is concerned with how effective you are at converting ideas into
products.
New product introduction rate. This is about the mount of innovation taking
place within the company. It can be measured by counting the number of new or
enhanced products or services introduced each year.
- 110 -
Appendices
Stage 2: Direction Setting

Worksheet 2a Vision
Clarify these questions in the group (other questions may be added) and
compose a vision statement
Possible leading questions for formulating the vision
What do we want our company to be in general terms?

What products and services will we offer to whom?
What will be the function of this product group in the future?
What will our desired position in the market be?
What manufacturing facilities will we need?
What will be our role in the society and environment?
How will we motivate our employees?
What performance levels will we need to achieve on our key dimensions of competitiveness,
and how will these be converted into financial performance factors?
Vision Statement:
Worksheet 2b Objectives
Use the vision and the results of the analysis in order to define: what do we
have to do out of a current perspective to come closer to achieving the
vision?
Define objectives, responsibilities, measurements and targets

Objective
Responsible
Function
- 111 -
KPI
Target
Date
Appendices
Stage 3: Manufacturing Objectives

Worksheet 3a
Take the objectives from Worksheet 2b that are relevant for the
manufacturing function and copy them on the Worksheet
KPI
Objective
- 112 -
Target Date
Appendices
Stage 4: Manufacturing Initiatives

Worksheet 4a: Select FACTO criteria
Define one criterion for each of the dimensions
Every member of the group should rank the importance of each criterion from 1-5 (low high)
The overall weight will be calculated

Dimension
Criteria
Weighting
A
Weighting
B
Financial
Acceptability
Customer
Technological
Objective
- 113 -
Weighting
C
Weighting
D
Weighting
E
Overall
Weight
Appendices
Worksheet 4b: Decomposition of the problem
Take one of the objectives from Worksheet 3a
The group identifies every variable that influences the objective and possible interrelationships
The related capabilities for the variables will be identified and plotted on the worksheet. Interrelationships will be plotted as
well
Related Capabilities
Variables
Objective
Objective from stage 3
- 114 -
Appendices
Worksheet 4c Current practice
For each of the capabilities of Worksheet 4b, the current practice will be identified
Capability
Current Practice
- 115 -
Appendices
Worksheet 4d Initiatives
Initiatives that could change the current practice are named and plotted by
the group
Initiatives
Related Capabilities
From Worksheet 4b
Variables
From Worksheet 4b
Objective
Objective from stage 3
- 116 -
Appendices
Worksheet 4e
The initiatives will be evaluated by the group members against the FACTOcriteria (-5=highly negative impact; 0=no impact; 5=highly positive impact)
Each criterion will be weighted with the weight from Worksheet 4a
The weighted points for all initiatives indicate the ranking for the initiatives
The initiatives that will be implemented immediately have to be agreed

Criteria
Weight
Initiative A
Initiative B
Initiative C
Initiative D
Initiative E
Initiative F
Initiative G
Initiative H
Initiative I
Rank
Initiative
1
2
3
4
5
- 117 -
Weighted
Points
Appendices
Stage 5: Policy Deployment

Worksheet 5 PDM
Objectives and targets from Worksheet 3a will be plotted as well as the

related initiatives from Worksheet 4f
Action for the initiatives and the responsibilities will be agreed and plotted
- 118 -

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CRANFIELD UNIVERSITY

SCHOOL OF APPLIED SCIENCES

SCHOOL OF APPLIED SCIENCES

ACADEMIC YEAR 2006/2007

A state-of-the-art Process for Manufacturing Strategy Formulation

Prof Dr Tim Baines

This thesis is submitted in partial fulfilment of the requirements

Thesis Aim and Objectives................................................................... 2

Thesis Structure ................................................................................... 2

Literature Review ........................................................................................ 4

Strategic Management as a Hierarchical Process ........................ 5

Manufacturing Strategy ........................................................................ 7

History and Definition of Manufacturing Strategy .......................... 7

Content and Process for Manufacturing Strategy ......................... 8

Strategic Management ......................................................................... 4

Chapter Summary .............................................................................. 12

Research Aim, Objectives and Programme .............................................. 13

Research Problem ............................................................................. 13

Aim and Objectives ............................................................................ 13

Research Programme ........................................................................ 14

Formation of the Theoretical Basis............................................................ 16

A Framework for Manufacturing Strategy Formulation....................... 17

Steps, Tools and Techniques for Strategy Formulation ..................... 18

Tools and Techniques for the Analysis Stage ............................. 18

Strategic Direction Setting .......................................................... 26

Tools and Techniques for Uncovering Alternatives..................... 27

Tools and Techniques for Evaluating Alternatives ...................... 29

Tools and Techniques to Guide the Implementation................... 30

Summary of Tools and Techniques ............................................ 31

Further aspects regarding the Application of the Process.................. 32

Formation of the Manufacturing Strategy Formulation Process ................ 35

Method for the Development of the Formulation Process .................. 35

Development of an Operational Framework ............................... 35

Evaluation of the Existing Tools and Techniques........................ 36

Composition of the Process ........................................................ 36

The Operational Framework .............................................................. 37

Evaluation of the Tools and Techniques ............................................ 39

A Process for Manufacturing Strategy Formulation............................ 41

Inputs for the Process ................................................................. 41

Stage 1: Analysis ........................................................................ 42

Stage 2: Direction Setting ........................................................... 44

Stage 3: Manufacturing Objectives ............................................. 46

Stage 4: Manufacturing Initiatives ............................................... 46

Stage 5: Manufacturing Policy Deployment ................................ 49

Chapter Summary .............................................................................. 33

Chapter Summary .............................................................................. 50

Testing the Formulation Process............................................................... 51

Application of the Process.................................................................. 51

The Company ............................................................................. 51

Conduction of the Process.......................................................... 52

Results of the Evaluation ................................................................... 54

Discussion of the Case Study ............................................................ 55

Chapter Summary .............................................................................. 56

Conclusion, Limitations and Future Research........................................... 57

Boston Consulting Group

Key Performance Indicator

Quality Function Deployment

Policy Deployment Matrix

Political, Economic, Social and Technical

Strengths, Weaknesses, Opportunities and Threats

1.2 Thesis Aim and Objectives

1.3 Thesis Structure