Competing with Flexibility Leeds School of Business University of Colorado Boulder, CO Professor Stephen Lawrence

Sources of Competitive Advantage Low wage rates Scale economies Focused production Flexible production Increased Variety Increased innovation Fast Response Time COST- BASED MGMT TIME- FLEX MGMT Blackburn, “Time-based competition,’’ in Strategic Manufacturing, Moody (ed), Dow Jones-Irwin, Homewood IL, Flexible production

Operations Flexibility Perspective of the producer: Perspective of the customer: Flex’i*bil’i*ty: capable and adaptable to change.

Shorter Product Life-Cycles Increased New Product Intro’s Demand Uncertainty Unexpected Competitors Fragmented Markets Need for FLEXIBILITY Need for FLEXIBILITY Marketplace Factors Factors Driving Flexibility Pressures to Reduce Inventories Changing Supplier Relationships Smaller Plants/Facilities Pressures to Improve Quality Process/Product Simplification Operations Factors

Wall Street Journal – Mar 04, 02 “[The US economy is] benefiting from a new flexibility woven into its fabric over the last decade. “[Greenspan] attributed the performance to the economy’s apparent increased flexibility and resilience…”

Types of Flexibility 1. Mix Flexibility –Ability to produce a variety of products (goods/services) with the same operational processes. 2. Changeover Flexibility –Ability to rapidly change over equipment and technology for a variety of products 3. Modification Flexibility –Ability to implement rapid design changes; customize standard products to meet customer requirement

Types of Flexibility 4. Volume Flexibility –Ability to adapt quickly and easily to changing demand patterns and volumes 5. Rerouting/Program Flexibility –Ability to create products and add value in using alternative methods, routings, techniques. 6. Resource Flexibility –Ability to handle variations in input resources (e.g., raw materials) and to use alternative resources

Strategic Flexibility

Pitfalls of Flexibility Focus vs. flexibility Specialists vs. generalists Cost/flexibility trade-offs Flexibility for whom and what? When does the market reward flexibility? Customization/responsiveness squeeze

Addressing the Squeeze Analyze Customer Expectations about Flexibility –what are the benefits to the customer? –what is the customer willing to pay for? –will customers be willing to wait –would customers be willing to settle for “controlled” customization? Assess Capabilities of the Firm –amount of excess capacity –cost and feasibility of carrying more inventory and/or personnel –current and potential technologies –cost/feasibility of changing point of product differentiation –feasibility of improving supply delivery –methods of collapsing cycle-times in value chain

Inducing Flexibility Alter design of operations (process) –single vs. multiple steps –focused layouts –general purpose equipment –assemble to order (vs. make to order/stock) Alter design of product –design for manufacturability –shared parts and components –personnel with broad training –information technology to assist –cross-functional design teams Manage demand –improved forecasts –yield management

Inducing Flexibility Manage supply –alter purchase contracts for quick delivery –bring long lead-time items in-house –process in smaller batches Use slack resources –yield management (induce demand) –multi-tasking of employees/personnel Operate to forecast –improve forecast –determine service level –staff / produce to meet service level –hold intermediate stock / supplies