Engineering Strategy - Dulas Ltd, Wales, UK - Case Study Example

Engineering Strategy – Dulas Ltd, Wales, UK. Executive Summary A manufacturing strategy is an integral component of any company’s business and corporate strategies and is usually made up of a myriad of well-coordinated and developed objectives, goals, and action programs aimed at ensuring a sustainable and long-term advantage of the competitors of a firm. It is important for a manufacturing strategy to be in tandem and consistency with a firm’s business and corporate strategies; it should in addition, be in tandem with the firm’s other strategies such as managerial functional strategies. This paper presents a proposed manufacturing strategy for the SBU I Division of Dulas Ltd, Wales, UK. This paper concentrates on Dulas’ solar PV, run-of-river hydro schemes, and PV-powered refrigerators SBU, which has three plants; two near the division headquarters in Wales, and one in Scotland. Most of the sales by Dulas, particularly, solar PVs, are to installers in the UK. Dulas however, has been feeling a lot of pressure with regards to meeting the rise in demand for its products and services, reducing of production costs, improving product development and improving the quality of its products and services. The goal of this manufacturing strategy is to offer Dulas with a structure for strategic decision-making for its manufacturing function; and to ensure that there is linkage between this manufacturing strategy and its business strategy. It conducts an initial audit of the firm’s current manufacturing strategy with respect to detecting the weaknesses and strengthens in its current manufacturing strategy based on each decision category; and to assess the relative position of each production line with regards to strategic measures of performance against that of most of its relevant competitors. It address the question of products grouping by putting the product lines in the process/product life cycle, as well as by assessing the performance objectives commonality and the missions of product families. The degree of emphasis and focus at each of Dulas manufacturing facilities/units or plants is also examined. Finally, the paper suggests allocation of product lines and processes to manufacturing units or plants. Capacity In the long-term, Dulas should meet the current upturn of demand and ensure better response to fluctuations. The action is to design a model capable of stimulating the impact of product substitution in PV capacity. Facilities Dulas should examine the concept of focussed factories or plants in the short-term and endeavour to all plants must be focused. The plant focus must be rationalized. Most importantly, moulding and stamping operations should be considered for separation, and where necessary, product lines, in this case, Solar PV, and Vaccine PV-powered refrigerators are positioned in a similar way within their product-process life cycles; as a result they should be considered as prime candidates of homogenous strategic groups. Therefore, each of the Dulas plants, the one in Wales, and the one in Scotland must be focused on a narrow product mix, with a well-defined target market as well as a clear competitive objective. Human Resources Personnel functions need to be upgraded and employee resources should be fully utilized . Most importantly, the compensation and reward systems need to be improved to recognize output as well as quality. Vertical Integration Make or buy decisions process needs to be standardized (Probert 2001). Integration should only be done when it is strategically justifiably. In order to experience and benefit from increased flexibility, Dulas should reduce backward integration. Scope/New Products Dulas needs to update, improve, and upgrade customer care and customer contact. The needs of the customers’ needs to be anticipated; therefore, Dulas must become involved with the network of installers in the UK, especially with matters regarding decision-making. Manufacturing Infrastructure The performance measuring system should be improved (Miltenburg 2005). Dulas should establish and equip a central system tasked with supporting new automated manufacturing technologies. Further, Dulas Ltd needs to invest in designing new performance measures. Vendor Integration Where necessary, Dulas Ltd should propose and pursue joint projects with potential vendors. This will enable it develop closer ties and better communication with all its vendors. It needs to identify potential vendor candidates for proposed joint projects. Process/technologies More automation should be installed, and state-of-the-art manufacturing equipment and infrastructure should be maintained. Where possible and necessary, Dulas should implement and increase automation. Quality Management Training should be improved and broadened and improvements should be institutionalized. There should be increased self-inspection by operators; these are very critical for ensuring and maintaining/improving Dulas position in the market. Description of Program Priority Cost Scheduled completion Personnel Requirement Responsibility Improvement of the quality training 1st – cannot be postponed since it will hurt the position of Dulas $100K August 2014 3 man-years Quality Manager Implementation of experimental design concepts 3rd- should be implemented if funds are available so as to enhance Dulas position in the market $30K 2014 1 man-year Design Engineers and experts Develop systems for cost-of-quality 2nd – should not be postponed since it will affect Dulas position in the market $$800K 2015 12 man - years Quality manager and controller Fit quality in incentive structures 2nd – should not be postponed since it will affect Dulas position in the market $80K 2014 2 man-years Quality manager and personnel Figure 1: Quality Control and Management Introduction For many industrial and manufacturing companies, the manufacturing division or operation is usually the most complex, the largest, and the most difficult to manage operation of the firm; and Dulas Ltd, Wales is no exception. As a result of this complexity, it is important for a firm or company such as Dulas Ltd, Wales, UK, to have a comprehensive manufacturing strategy to help it in managing and organizing its manufacturing operation and system. A manufacturing strategy cannot be formulated in a vacuum; this is because it is affected and it affects many organizations, both internal and external to the firm. As a result of interrelations between the various manufacturing units of the firm, various functions, as well as various divisions of the firm, the company’s markets and competitions, it is important that the process of designing the manufacturing strategy is carried far beyond the borders of the firms manufacturing process. Figure 1 considers these interrelations and interactions and shows the two basic interrelationships that are consider in this manufacturing strategy design. The first thing considered is ensuring that the manufacturing function works in tandem with the marketing, finance, personnel, R&D, purchasing and engineering functions (Hill, T. and Hill, A. 2009). The keys to success of this manufacturing strategy are consistency and cooperation. The second thing put into consideration for this manufacturing strategy is the careful consideration of the external markets to the firm as well as the monitoring of the aforementioned groups, marketing, finance, personnel, R&D, purchasing and engineering, within the firm. For instance, the manufacturing managers within the company, together with the engineering team, will be responsible for monitoring the developments in the energy industry in order for them to keep abreast with the new trends and new application in the energy industry. Additionally, the manufacturing groups in partnering with the marketing team will monitor the markets in which the firm’s products may be sold and compete, in order to be aware of the new product introductions as well as improvements by the competitors in the market (Ladet and Vernadat 2013). The goal of this manufacturing strategy for Dulas Ltd is to ensure that the firm achieves long-term sustainable cutting edge and advantage over its competitors in all the business that it will choose to participate in. Dulas Ltd, Wales, UK, is an energy firm set up in the UK by engineers from the Centre of Alternative Technology. It offers professional renewable energy products and services on a commercial basis; however, its operations are within a very strong community ethos (Draisey 2010). Dulas Ltd, Wales, UK, has over the years grown consistently and has been able to supply its clientele with a myriad of renewable energy technologies both within the UK as well as abroad. Dulas Ltd, Wales, UK refurbishes old run-of-river hydro schemes and builds new ones too, throughout the greater UK. It is considered today as the leading supplier of PV-powered refrigerators for vaccines that are used in developing countries. Dulas Ltd, Wales, UK installs and sells solar PV as well as modules to the installers in the UK. Most of its customers include schools, industrial clients, community groups, as well as housing associations. Further, it specializes in the installation of wind turbines for the public sector and the commercial projects, while at the same time it offers professional services to larger wind farms developers. Dulas Ltd, Wales, UK installs biomass heating systems in Wales, as well as the district heating scheme. It is estimated that Dulas Ltd, Wales, UK had, by 2008, installed more than 8MW of small-scale hydro, 1.5MW of biomass heating, 1MW of sola PV, and more than 22kW of wind systems (small) in the entire UK. Over the same period, the company achieved significant sales of PV to installers and received consent for more than 240 MW wind energy capacities. Currently, Dulas Ltd is considered to be CO2 efficient and manages close to 4,500 tonnes/year of carbon dioxide. The firm offers various mechanisms of financing such as its Renewable Energy investment Club intended to encourage communities to invest in renewable energy; an ESCO through which it sells the heat from biomass; and a private investment mechanism for hydro schemes. Dulas offers fresh graduates an opportunity to train as well as placement opportunity for students within the EU. The past twenty years have seen the company gradually and tremendously grow and expand with the increase in demand for its products and services (Draisey 2010). The strategic Manufacturing decision categories for Dulas Ltd, Wales, UK According to, a manufacturing strategy needs to be comprehensive and all inclusive in terms of its provision of guidelines that address the various components of decision-making in manufacturing. It should also ensure that the complex decisions that are there in manufacturing management are decomposed into small analysable facets. For the case of Dulas Ltd, Wales, UK, this design document describes nine different strategic categories of decisions that are addressed in this manufacturing strategy; they include capacity, facilities, human resources, vendor relations, technologies or process, quality infrastructure, vertical integration, and scope/new products and services. The process of strategic planning is one that is hierarchical in nature. First, as had already been mentioned, the corporate level opines the firm’s vision and the strategic posture or position of the firm. Then business managers create the firms business strategy that is tandem with the firm’s corporate challenges and thrusts. Functional manger in the end offer necessary strategic functional support. The resulting manufacturing strategy must in all cases be linked with the business strategies of the firm. This is accomplished by first determining the firms manufacturing requirements imposed by a myriad of wide action programs for each SBU, strategic business unit; in this case, the solar PV, run-of-river hydro schemes, and PV-powered refrigerators SBU’s. For this purposes, the forms in Figure 1 displays the collected manufacturing requirements, which represents the demands that business managers have placed on the firm’s manufacturing function. It is expected that disagreements will occur between the requirements of manufacturing and those of business with regards to the feasibility as well as the effectiveness of some of these articulated requirements (Tan and Matthews 2009, Boer and Drejer 2005). In the event that concurrence cannot be achieved via a direct negotiation process, this strategy articulates that higher levels of the organization must be contacted for a resolution. SBU General Action Programs Manufacturing Requirements Solar PV Determine the requirements of installers that are not currently being met Design new packaging styles for new and existing customers Study the impact of adopting Polymer-based photovoltaic devices with regards to their potential to offer flexibility, light weight, low-cost solar energy conversion, and manufacturability Assure technology and capacity for new demand Design and develop the plants new packaging capacity and capability Plan for ultimate technology changeover Vaccine PV-powered refrigerators Determine the requirements of installers that are not currently being met Design new packaging styles for new and existing customers Assure technology and capacity for new demand Design and develop the plants new packaging capacity and capability Figure 2: Collected manufacturing requirements Audit of the current manufacturing strategy It is important, according to Hill, T. and Hill, A. (2009), to carry out an initial audit of the firm’s current manufacturing strategy since it helps gather information from participating managers with regards to what they position or feeling about the existing manufacturing strategy. The objective here is to assess the weaknesses and strengths of the existing manufacturing strategy based on the categories of the manufacturing strategy. The goal is also to determine the competitive standing of all the major product lines on the basis of our manufacturing performance measure. The suggestion from this audit suggests how evaluations can be carried out in the future. Each of Dulas product line and services compare against its competitor in all strategic dimension. See Figure 3, and Figure 4 Decision Category Past Policy Strengths Weaknesses Capacity Use third shift, inventories and overtime in order to respond to cyclicality Its flexible Overtime and layoffs are particularly expensive/costly Facilities Focus is on process Leverages on economies of scale Results in long supply distances; physical distances Scope/New Products Respond to installer on principle or major product lines Less associated risks This approach is based on knee-jerk reactions; it is not anticipatory, thus it ignores the idea of focus Vendor Relation Multiple resources, competitive bidding and it is cost oriented Ensures that costs are low Hurts cooperative ventures and quality of products Quality Management Heavy dependence on cost quality tools and statistical process control Support from top management; it is an integrated approach Compared to competition from other EU manufacturers, the US, China, and Canada, the quality lags Process Technologies Solar PV and Vaccine PV-powered refrigerators processes are automated; the processes are also continuous State-of-the-art and competitive in Vaccine PV-powered refrigerators and solar PV Automation in Solar PV and Vaccine PV-powered refrigerators could result in reduced or low costs Human Resources Strong quality for programs for work life Participation of employees in decision-making; excellent communication within the firm The system for compensation and rewards fails to recognize the quality of output by employees Vertical Integration Significant backward integration all through to Solar PV Good control of quality and cost Insufficient focus, transfers complications in pricing Manufacturing Infrastructure Control systems that have short-term tactical orientation Very good control orientation It is much a short-sighted system Figure 3: Characteristic of Dulas Ltd current Manufacturing policies with regards to the strategic decision categories Product Line External measures for performance Cost Delivery Quality Flexibility Import* Perform* Import* Perform* Import* Perform* Import* Perform* 1. Solar PV 2. Hydro 3. Vaccine PV-powered refrigerators 30 30 20 +++ +++ ++ 20 20 20 + ++ ++ 50 50 40 --- E ++ 20 20 20 - - + Key: Import** = Importance Perform* = Performance based on leading competitors Figure 4: Relative performance and importance assessment of each product line Product Grouping A major issue for Dulas Ltd with regards to its manufacturing planning is that of product grouping. Currently there is an extensive proliferation of manufactured products. It is undesirable and impossible to deal solely with each product in isolation; Dulas Ltd, must consider ways of aggregating individual products into product groups. The question therefore is how will Dulas Ltd group product lines into sensible strategic product groups that share certain attributes that are common amongst them? Using the product –process life cycle matric, each product line is positioned in a 2-D grid, with the stages of the product –life cycle depicted. The evolution of products is depicted in a four-phased process that begins by one of a kind, low-volume products, and ends in highly standardized products (Jagdev et al. 2004). The process used by Dulas in the manufacture of these products follows similar evolutionary process and begins with a costly but highly flexible process in the job shop and ends in a specialized, highly automated process of manufacturing. Currently, there are certain product lines, particularly, Solar PV, and Vaccine PV-powered refrigerators are positioned in a similar way within their product-process life cycles; as a result they should be considered as prime candidates of homogenous strategic groups. Some degree of congruency also exists between their natural process structure as well as their product structure (Bellgran and Säfsten 2010, SRIVASTAVA and VERMA 2012). The following figures, Figure 4 and Figure 5 show the proposed product line grouping based on market and product characteristics; additionally, they map these product grouping on the product-process life-cycle matrix. Product Line Market/Product Characteristics Market Volume Pace of product introduction Market Growth Breadth of Product Line Product Standardization Solar PV high high high high medium hydro schemes medium Medium medium low PV-powered vaccine refrigerators medium medium high high low Figure 5: Product grouping assessment Product structure Process life cycle phase Product Structure Product Life cycle phase I Low volume- One of a kind, Low Standardization; II High Volume Few major products III Low Volume Multiple Products IV High Standardization-High Volume Commodity products Job Shop hydro schemes Batch Assembly Line PV-powered vaccine refrigerators Continuous Flow Solar PV Solar PV Figure 6: Each product line position on the product/process matrix Dulas Limited must endeavour to produce high volume products such as Solar PV on a continuous flow process as indicated on the product-process matrix. Therefore, the Solar PV factory must adopt a continuous flow process. Product lines that share the same competitor success missions and requirements will be grouped into the same product grouping (Sowell 2006, Kolli 2005). Additionally, product lines that appear on the same product-process matrix stage, such as Solar PV and PV-powered vaccine are to be grouped into the same product groupings. As such, such product lines can be manufactured in the same plant with the same production process. In future, Dulas Ltd should use the same process, as in Figure 5, to determine product lines that would efficiently and strategically belong in the same product grouping and possibly be manufactured in the same facility or plant with the same process, as a result of their similarity in strategic performance missions and characteristics. Degree of focus at each of Dulas Plants It is important for Dulas limited to have focused plants or manufacturing facilities; this is because a plant cannot process or produce a large variety of hugely different tasks as well and as efficiently as expected. Therefore, each of the Dulas plants, the one in Wales, and the one in Scotland must be focused on a narrow product mix, with a well-defined target market as well as a clear competitive objective. This will enable it outperform its competitors plants which hugely attempt to carry out a myriad of unrelated and conflicting tasks, and have inconsistent manufacturing policies. Using the product-process life cycle matrix, the following figures illustrate how this proposed strategy will ensure that Dulas’ plants are focused and are consistent in terms of the congruency between the products and staff tasked with manufacturing them. Plant Product lines manufactured in each SBU or plant Product line Strategy Product life cycle stage Process technology in use Scotland Solar PV PV-powered vaccine Grow with industry Grow with industry Mature Mature Continuous flow Assembly line Job shop Wales Solar PV PV-powered vaccine Grow with industry Grow with industry Mature Mature Continuous flow Assembly line Job shop Figure 7: How focused the plants should be Facilities Dulas Ltd, Wales, UK is a multi-facility organization, as such, it is important that various facilities are focused or specialized. Given that Dulas Ltd, Wales, UK refurbishes old run-of-river hydro schemes and builds new ones too, throughout the greater UK, and is the leading supplier of PV-powered refrigerators for vaccines that are used in developing countries; and also installs and sells solar PV as well as modules to the installers in the UK; its facilities will first be focused by product groups and process types; then by geography and by volume. Dulas must endeavour to have three distinct manufacturing facilities, one for the manufacture of new run-of-river hydro schemes, as well as for the refurbishment of the old ones; another for the manufacture of PV-powered vaccine refrigerators, and the other for the manufacture of solar PV. In the case of manufacturing of PV-powered vaccine refrigerators for the developing countries markets; Dulas needs to have a high flexibility and low volume facility in the UK for the manufacture of prototypes, and a dedicated high volume plant for the manufacture of the actual products that are in high demand; in this case, such a facility should be in a location that is proximal to the market and to cheap sustainable work or labour force. Overall, the size, capabilities, and location of these facilities must ensure and enable maximum efficiency in terms of processes, production environment, as well plant output (Boyer and Verma 2010). Capacity The decisions for capacity are interconnected with the decisions for facility; as such, it will be determined based on the facility, equipment, as well as the human capital or resource currently under the management of Dulas Ltd. Dulas currently employees 160 persons in both its plant and office in Wales and in Scotland. Due to the continuous rise in demand over the past few years especially with regards to its solar PV products and services, an important manufacturing strategic decision will be to hold excess capacity in the solar PV plant. This will ensure continuous and constant supply of solar PV products and services within the UK. Dulas limited anticipates increase in demand for its PV-powered vaccine refrigerators for developing countries; therefore it needs to consider an aggressive, flexible approach and add capacity to that manufacturing unit. Manufacturing Infrastructure In order to support its implementation as well as decision-making in the manufacturing function, it is important for Dulas to have a solid company-wide infrastructure. This infrastructure should encompass control and planning systems, lines of responsibility and authority, as well as operating policies (Li and Meerkov 2008). Currently, Dulas has a strong corporate culture within a very strong community ethos, which is very crucial for supporting its infrastructure. Summary of the proposed Manufacturing Strategy The figure below, Figure 7, is a summary stating the articulated manufacturing strategic goals and objectives as articulated through the overall actions programs for each of the decision categories for manufacturing strategy as articulated herein. Each of the overall action programs have been supported by a number of specific action programs which can easily be monitored and whose contributions can be measured. For each manufacturing strategic category, we suggest that well defined objectives with regards to every specific and corresponding action programs must be shown. Decision Category Objectives Overall Action programs Short-term Long-term Capacity Meet the current upturn of demand Better response to fluctuations Design a model capable of stimulating the impact of product substitution in PV capacity Facilities Focus issue should be studied; all plants must be focused Plant focus must be rationalized Moulding and stamping operations should be considered for separation; Process/technologies More automation should be installed State-of-the-art should be maintained Where possible and necessary, Dulas should implement and increase automation Human Resources Personnel functions needs to be upgraded Employee resources should be fully utilized The compensation and reward systems needs to be improved to recognize output as well as quality Vertical Integration Make or buy decisions processes needs to be standardized (Probert 2001) Integration should only be done when it is strategically justifiable For increased flexibility, Dulas should reduce backward integration Scope/New Products Dulas needs to update, improve, and upgrade customer care and customer contact The needs of the customers’ needs to be anticipated Become involved with the network of installers in the UK, especially with matters regarding decision-making Vendor Integration Where necessary, Dulas should propose and pursue joint projects Develop closer ties with all its vendors Dulas needs to identify potential vendor candidates for proposed joint projects Manufacturing Infrastructure The performance measuring system should be improved (Miltenburg 2005) Dulas should establish and equip a central system tasked with supporting new automated manufacturing technologies Dulas needs to invest in designing new performance measures Quality Management Training should be improved and broadened Improvements should be institutionalized There should be increased self-inspection by operators Figure 8: Summary of the proposed Manufacturing Strategy for each decision category List of References Bellgran, M. and Säfsten, E.K. (2010) Production Development: Design and Operation of Production Systems. London: Springer-Verlag Boer, H. and Drejer, A. (2005) “Managing Innovative Manufacturing”. International Journal of Operations & Production Management 25 (2) Boyer, K. and Verma, R. (2010) Operations and Supply Chain Management for the 21st Century. Mason, OH: South-Western Cengage Learning Draisey, I. (2010) Case Study Summary: Dulas Ltd, Wales, UK. Machynlleth, Wales Hill, T. and Hill, A. (2009) Manufacturing Operations Strategy. New Haven, CT: Palgrave Macmillan Limited Jagdev, H.S., Brennan, A., and Browne, J. (2004) Strategic Decision Making in Modern Manufacturing. Norwell, MA: Kluwer Academic Publishers Kolli, S. (2005) Production & Operations Management Essentials. Piscataway, NJ: Research & Education Association Ladet, P. and Vernadat, F. (2013) Integrated Manufacturing Systems Engineering. New York: Springer Li, J. and Meerkov, S.M. (2008) Production Systems Engineering. London: Springer Miltenburg, J. (2005) Manufacturing Strategy: How to Formulate and Implement a Winning Plan. 2nd edn. New York: Productivity Press Probert, D. (2001) Developing a Make Or Buy Strategy for Manufacturing Business. London: Technology & Engineering Sowell, T.J. (2006) Strategic Manufacturing Management: Strategies to Achieve Managerial Competitiveness. Belmont, CA: Xlibris Corporation SRIVASTAVA, R.M. and VERMA, S. (2012) STRATEGIC MANAGEMENT: CONCEPTS, SKILLS AND PRACTICES. New Delhi: PHI Learning Pvt. Ltd. Tan, K.H. and Matthews, R. (2009) Operations Strategy in Action: A Guide to the Theory and Practice of Implementation. Cheltenham, UK: Edward Elgar Publishing Read More