ASSIGNMENT ON

OPERATIONS
MANAGEMENT
PRODUCTION STRATEGIES

BY:
Raveena Sharma
20MBA019
 PRODUCTION STRATEGY
Organizations rely upon different strategies to achieve their business goals and
survive in today’s competitive business environment. These strategies are
planned for the long term and carry a broad range of activities. Production
strategies are broad long-term action plans. They are made for achieving the main
objectives of the organization. Production strategies tell us what the production
department must do to achieve the top aims of the organization. It provides a
road map for the production department. Productions Strategies are the whole
system of decisions that are aimed at shaping both the long-term capabilities of
operations irrespective of their type and contribution to the overall strategy
achievement.

In other words, production strategy consists of a series of decisions that

the organizations take in order to implement competitive business strategies.
Production strategy is a functional strategy i.e., it is a strategy made to achieve
the main objectives of the organization. Utilizing specific strategies within
production planning and control can boost efficiency, reduce waste, reduce cost,
and ultimately improve the overall production process. Failure to have products
fulfill orders may erode the confidence of buyers, but having too much supply on
hand is risky as well, for various reasons. Therefore, it is important to consider the
multiple strategies that can be utilized in production planning and control and
choose the one that may be the most beneficial.
 STRATEGIES USED IN PRODUCTION
PLANNING
The main strategies used in production planning and control are the chase strategy, level
production, make to stock, and assemble to order. They are explained as under:

1. CHASE STRATEGY (Production matches Demand):

The chase strategy pertains to the process of chasing demand that is set
by the market. Production is set to match demand and does not carry any leftover products.
This is categorized as a lean production strategy, saving on costs until the demand or the order
is placed. Inventory costs are low, and the cost of goods for products sold is kept to a minimum
and for a shorter length of time. The chase strategy is common in industries where perishables
are an issue and with company that don’t want the added risk of loss, theft or unsold products.
The production schedule is based on orders and immediate demand.

2. LEVEL PRODUCTION: Constant production over time:

Level Production is a strategy that produces the same number of units equally.
This is common in industries where demand is cyclical and production capabilities are limited or
capped. For example; if a manufacturing plant can only produce 10,000 calculators per month,
the demand for calculators changes based on consumer cycles that peak during the start of the
school year and tax season. If the demand in peak seasons is 20,000 per month, the plant could
not meet the demand. By consistently producing 8,000 units per month, the manufacturers
keep new inventory flowing during no peak seasons but is still prepared for peak seasons.

3. MAKE TO STOCK: Enough product to stock shelves:

A manufacturer can choose to make-to –stock producing enough to stock the shelves
of retailers. This is a common strategy for rolling out a new product such as a cell phone or car.
Products are made and put in the inventory so that consumers can see what is available. This
strategy is similar to level production, suing the efficiency of constant production and lowers
costs and keeps inventory at minimum. Buyers can access products readily and don’t need to
wait, keeping demand consistent.

4. ASSEMBLE TO ORDER: For perishables:

Assemble to order strategy is a common production strategy for restaurants or any
company that has perishables to consider. A florist may have supplies to make 100
arrangements but won’t make an arrangement until the order is placed. This reduces spoilage
and also allows for freshness and customization of perishable products.
 COMPONENTS/ ELEMENTS OF
PRODUCTION STRATEGIES

1. DESIGNING AND POSITIONING THE PRODUCTION SYSTEM:

This element includes choosing the type of processing system, production
design, and finished goods inventory plan, etc. for each mail line of product in the business plan.
The two main types of product design are:
 Custom Product Design: This is the one when there is a low volume and special features
are already present or inbuilt. These types of products are designed as per the
requirements of individual customers. For example, different products such as boilers
turbines, air compressors, etc come under this category.
 Standard Product Design: This is related to a universal design that is used to provide a
wide acceptance of the product among its customers. Both quantity and demand are
high in such a design. This is useful in quite large batches as it helps in meeting the
stable demand for the long term. Fans, televisions, air conditioners, etc are a few
examples of standard product design.

Production system is of two types i.e.

 Systems focused on products: This type of production system is used in mass

production through a group of machines such as computers, automobiles, beverages,
etc.
 System focused on processes: This includes product designing on a single activity or
task such as packaging, painting, etc.

2. FOCUSING PRODUCTION/ MANUFACTURING AND SERVICE FACILITIES:

Another important element of production strategy is to plan for different
production facilities to achieve some sort of specialization in each of them. This allows the
production facility to gain a command over achieving specific objectives because the equipment,
procedures, and supporting systems can focus on certain limited tasks for a particular set of
customers. So, we can say that some specialization in production facilitates an organization to
offer different benefits to its customers on products such as reduce cost, quicker delivery,
flexibility, timely delivery, high quality of the product. Also, there will be a few overheads and
the organization is able to perform better than its competitors.

An organization should consider continuous demand patterns and economies of scale at the
time of making a plan of specialized product lines.
 3. DESIGN AND DEVELOPMENT OF PRODUCT/SERVICE:
Different stages or phases that are involved in designing and developing a
product or service include-
 Idea generation
 Making the feasibility reports
 Prototype designing and testing
 Preparation of a production model
 Evaluation of production-related economies of scale
 Market-based testing of the product
 Taking feedback
 Developing final design and initiating the production

In new product development, activities such as marketing, operations, engineering, etc. are
considered. The product designing process creates a great impact on the inventory level, quality of the
product, production cost, and the total number of suppliers. Different products that are designed and
launched in the market consist of their own life cycle. Different phases of such life cycle include the
following-

 Introduction phase
 Growth phase
 Maturity phase
 Decline phase

The introduction phase is the one in which sales have dependability on efforts related to promotion and
marketing. If a product is successful at this level, then it will come under the next phase i.e. growth. In
the growth phase, decisions are taken by the organization on future investments and the capacity to be
enhanced. In the maturity phase, the main focus of an organization is to improve the efficiency related
to processes, cost minimization, etc. The declining phase is the phase where products may become
obsolete in terms of technology and the requirements of customers. This indicates the warning sign to
stop production. Different products such as floppy drives, typewriters, recording tapes, etc. have lost
their market as they have gone through the above phases.

4. SELECTION OF TECHNOLOGY AND PROCESS DEVELOPMENT:

To determine the way of producing products is considered one of the essential aspects
of operations strategy. This includes making decisions and plans on every detail of processes
and facilities in production.

To achieve the optimum level of production, the analysis of the selected product for production
is conducted for the process and appropriate technology. Operations managers face various
challenges in taking such decisions due to the availability of lots of options or alternatives.
 Each alternative can be analyzed through techno-economic analysis for making decisions related
to the required technology. Combination of production equipment of high-quality and
conventional machines; and, use of flexible manufacturing systems, robotics, automated devices
for the purpose of movement of materials, etc. have provided an advantage to the production
units to gain expertise in flexibility, quality, production at reasonable costs. This enables the
organization to compete in the market.

5. RESOURCE ALLOCATION:
Usually, organization resources are limited for production purposes and so, the
continuous problems are faced by production units in the allocation of limited resources such as
cash, capital, workforce, machines, materials, capacity, equipment, services, etc. The allocation
of these resources must be in a way that helps in achieving the goals of operations up to a
maximum extent.

Also, allocating these resources at the right time and place of production shows the efficiency
level of production managers. Economical production can be achieved by utilizing resources in
an optimal way. A sound operations strategy is required to obtain superior quality products,
minimize wastage and optimum utilization of available resources.

6. PLANNING OF CAPACITY, FACILITY AND LAYOUT:

The key decision areas of an operations manager are to create layout, facilities, and
location for the production as these are considered critical areas to achieve competitive
advantage. The expansion of the manufacturing unit in the future also depends on this decision.

Decisions include in this are related to the land and equipment acquisition for production,
location of new manufacturing units. At the time of evaluation of different alternatives, the
operations manager also considers market access, and availability of materials, etc. Huge capital
is needed for production capacity.