Build to Order and How Does It Differ from More Traditional Approaches to the Car Business - Coursework Example

? Case Study Table of Contents References 10 What is it meant by “build to order” and how does it differ from more traditional approaches to the car business? Answer 1: - Build to Order often referred to as ‘Make to Order’ is defined as a strategy of production, where the products are only manufactured when the order is fully confirmed. This approach towards production or the approach towards order fulfilment is the oldest one, and is probably the most suitable approach for low volume and highly customized products. In this context, according to some eminent scholars Build to Order strategy is most suitable for the products which are highly configured, and for products whose holding inventory is expensive (Gattorna, 1998, p.80-81). Some of the products which fall into this category are computer servers, automobile products and aircraft. In the context of automotive products or car industry, Build to Order (BTO) is considered as an approach, where the production takes place when a confirmed and validated order is received from the end consumer. The end customer refers to the individual who places an order for the product to the company. However it must not take into account any orders by the national sales companies, point of sales or dealers, bulk orders, original equipment manufacturer, or any other middle man in the entire supply chain. It should be also noted that BTO does not take into consideration any kind of production or manufacturing of the orders which are in the pipeline. As the pipeline approach embraces further sophistication and is often termed as build to stock (BTS) system or build to forecast (BTF) strategy towards production. Traditionally, there were several manufacturing approaches. However the most common form was the lean production method. Lean manufacturing or production is considered to be one of the traditional approaches of production. In this method, manufacturers primarily consider the total expenditure of resources for any object, apart from value creation. This approach mainly focuses on the reduction of waste, and at the same time ensures superior quality. In addition, this approach intends to reduce cost by creating the business even more competent and receptive to the market needs. Some of the important aspects of this production strategy are as follows: - Just in time production (JIT) Kaizen (Continuous improvement) Cell production Zero defect production and Total Quality Management (TQM). Time based management Simultaneous engineering Quality Circles (Cutcher-Gershenfeld et al., 1998, p.75) There are many differences between the two approaches of car production. The differences come in the form of marketing, logistics, production, customer relationship, managing uncertainty, suppliers and also finished goods inventory. For example in the Build to Order approach the production system focuses on the supply chain flexibility and customer demand. On the other hand, the traditional approaches mainly focuses on stable and level schedules, and also concentrates on fixed order line-up. Some of the other differences between the traditional approaches and build to order approach are presented in a tabular form below. Table 1 – Differences between traditional approaches and build to order supply chains Factor Build to order approach Traditional approach Suppliers Responsive Lead times are long Logistics Non differentiated and mass approach Customized, reliable and fast approach Marketing Pull the customers Push the customers (Source: Deloitte, 2008) To what extent is the Product Life Cycle framework useful to explain the emergence of “build to order” manufacturing? Answer 2: - In the last few decades, there has been phenomenal growth and investment in the area of product life cycle management. Companies are exploring the opportunities to fully harness their assets and streamlining product lifecycle processes like never before. The theory of product life cycle was developed in the early 1950s. The primary rationale behind the development of this theory is to uncover the expected life cycle of a product. According to the theory a product passes through four stages namely introduction, growth, maturity and decline. The intention towards the management of product lifecycle is to enhance the profitability of the product in each of the stages (Wisner and Stanley, 2007, p.576). Similarly the concept of product life cycle plays an important role in the manufacturing process of the product. It is because a product is manufactured depending upon the expected life cycle. However in some cases the duration of each of the phases becomes unpredictable thereby making it difficult to gauge maturity and decline stage of the products. The management of product life cycle embraces all the phases of production. The elements of PLC management are detailed design, systems design, analysis, and simulation, customer support in-service management, quality management, production planning, requirements definition, manufacturing planning, and end-of-life recycling. A number of scholars have illustrated that the centre of product lifecycle management is the management of all the technology used for accessing knowledge & information and also the product data. The concept of product life cycle framework emerged from various tools such as PDM, CAM and CAD. The main processes employed in PLC management are design, realize, conceive, and service. However it can be also viewed as the combination of the aforementioned methods & tools, and processes during the stages of product life cycle. The entire management process is extremely complex. This is because departments and people cannot carry out their activities in isolation. On the other hand design can be regarded as an iterative process, as it often needs modification in order to satisfy the requirements of the customers. Some time the design of a particular product needs to be changed completely. Therefore production should start only when the final customer has provided the exact requirements. This has led us to the concept of build to order manufacturing. In the context of an automotive industry, the emergence of build to order manufacturing approach can be due to the changes in the customer demands, which encouraged companies to focus on this strategy. In addition, the concept of product life cycle is highly responsible for the materialization of build to order approach. Therefore form the above study and findings from the literature, it can be concluded that to a large extent the framework of product life cycle is functional in the appearance of build to order manufacturing process. Figure 1 (Source: Fathallah et al., 2009) What does “build to order” entail in terms of process design? Answer 3: - Process design is defined as the activity performed to underpin the equipments needed, work flow and implementation requirements of a specific process. It typically makes use of number of tools which comprises of process simulation software, flowcharting and scale models among others. In general a process design consists of six steps. The steps for successfully designing the process are detailed below:- Complete a process terms of reference Block the schedule Develop and confirm how the schedule will flow Build a preliminary design Check the preliminary design with others Finally complete the design (Strachan, 2008). Build to order process also plays a crucial role in designing the process of production. The primary rationale behind the implementation of Build-to-Order are simplification of the supply chain, synchronized design of flexible processes and versatile products, development of spontaneous supply chain and also mass customization of the variety. Therefore from the identified functions of Build to order, it can be stated that it plays a significant part in the process design. In this context several scholars view Build-to-order Supply Chain (BOSC) as an efficient way of achieving higher customer value by designing superior methods. This approach has the ability to fulfil the order of a group or individual customer’s order, besides maintaining low cost, eliminating waste, achieving short response time through elastic production, cutting inventory cost and integrated logistics. Now in the context of the study, build to order approach mainly entails about Postponement process design. Postponement process design facilitates the companies to meet the demands of the customers quickly. In addition, it also fosters companies to maintain low operational cost. The designing of process and products are the most important activities of Built to order approach. This system entails that the production system need to be receptive and elastic so as to meet the need of every individual customers. The approach also put emphasis on the fact that decreasing the total lead time for designing products and ingeniously procuring components and raw materials are significant towards responding the customers quickly and proficiently (Glasserman and Wang, 1998). According to Hsu and Wang (2004) a design concept is advocated to diminish the impact of imprecise forecasts and the reduction in order response time. In addition, according to Lee (1996) some of the issues that highly benefit the approach of built to order are modular product architecture, e-procurement, strategic alliances and risk pooling. To what extent do the data concerning return on capital employed in Julie Froud et al. (2000) support the argument that builds to order is a superior approach to manufacturing? Answer 4: - According to Julie Froud et al. (2000) Companies around the world have understood the value of shareholders. The value of shareholders is often described as the part of a process. In this context Julie Froud et al. (2000) have termed the process as financialisation and denotes a completely new kind of competition which involve changes in the financial results and also way of increasing the speed of management work. According to the author financialisation is not about higher quality, less inventory, and better factories with less manufacturing hours, rather it encompasses constant pressure on management from the capital market; with financial results in terms of Return on Capital Employed and share price the primary measure of enterprise performance is its characterization. Due to this approach the upper management is getting increasingly focused on restructuring by means of interior downsizing and reorganization. Several studies reveal that build to order process help companies to gain maximum return on investment. This is primarily because of the entire supply chain frame work of build to order. The aspects such as marketing, logistics, production, managing uncertainty, customer relationship, suppliers and also the inventory of finished goods plays important roles in offering high return on investment. In addition, build to order manufacturing process also offers several benefits to an organization. Build to order manufacturing process is generally used by the companies to develop products that meets the exact specification of the consumers. One of the biggest advantages of using this strategy is that the products that are manufactured according to the need of the consumer which also ensures the fact that companies do not have to depend upon the availability of the inventory. In a broader aspect, the advantages of build to order manufacturing are as follows:- Specialization: - The biggest advantage of a build to order strategy is that it offers specialization to each and every product which allows fulfilling the expectation of the consumers. In order to cite instance a customer gives order mentioning some specified requirement of the consumers. Through this approach even the smallest of the requirements of the customer can be fulfilled. No Extra Inventory: - This strategy also eliminates any kind of inventory which in unnecessary. Instead of manufacturing products with a hope that it would sell in the future built to order process manufacture only those products that has been already ordered by a customer. Therefore it saves the overall cost. Responsive Approach: - The build to order approach is highly responsive toward the suppliers and customers. This reduces the cost of holding inventory and other overhead cost. Moreover, the responsive approach also facilitates the company to serve customers quickly in comparison to other production approaches. Hence from the identified benefits it is clear that built to order is one of the effective approaches towards production. However other production approaches also offer several benefits, but the high return on investment and lesser inventory cost also make the process superior. References Cutcher-Gershenfeld et al., 1998. Knowledge-Driven Work: Unexpected Lessons from Japanese and United States Work Practices. New York: Oxford University Press. Deloitte, 2008. Delivering on the promise: A Guide to Improve Supply Chain Performance. [pdf] Available at: [Accessed 08 December 2012]. Fathallah, A., Cardinal, J. S. L., Ermine, J. L., Bocquet, J. C., 2009. Enterprise Modelling: Building a Product Lifecycle (PLM) Model as a component of the integrated vision of the enterprise. Research in Interactive Design, 3, pp. 1-10. Froud, J., Haslam, C. J., Johal, S. and Williams, K., 2000. Cars after Financialization: A Case Study in Financial Underperformance, Constraints and Consequences. Competition and Change, 6 (1) pp.13 -41. Gattorna, J., 1998. Strategic Supply Chain Alignment: Best Practice in Supply Chain Management. 6th ed. Hampshire: Gower Publishing, Ltd. Glasserman, P., Wang, Y., 1998. Lead-Time-Inventory Trade-Offs in Assemble-To-Order Systems. Operations Research, 46 (6), pp. 858–871. Hsu, H.M., and Wang, W. P., 2004. Dynamic Programming for Delayed Product Differentiation. European Journal of Operational Research, 156, pp.183–193. Lee, H. L., 1996. Effective Inventory and Service Management through Product and Process Redesign. Operations Research, 44 (1), 151–159. Strachan, D., 2008. Process Design: Making it Work. New Jersey: John Wiley & Sons. Wisner, J. D., and Stanley, L. L., 2007. Process Management: Creating Value along the Supply Chain. Connecticut: Cengage Learning. Read More