HQ INJECTION MOULDING COMPANY
HQ injection moulding a manufacturer of homeware product and also a supplier of components to industry (domestic appliance) was acquired by a parent company. Every company corporate objective is to achieve ROI, profit and growth. In which a marketing strategy is determined to meet this goals. Seven years ago HQ products had reached maturity stage of its life cycle and was faced with increase competition form its competitors and in other for them to survive and grow, the company had to undergo restructuring and derive a strategy on how to compete in the market.
Prone to its acquisition the company was faced with difficulties which where,
- Faced with competition from small firms on their home range product ,
- Overcapacity (moulding) due to the acquisition from their parent company.
- Consumer saw their product as merely cheap and transient plastic materials rather than home ware.
- They competed in the market place on price rather than on product basis.
So a corporate strategy was adopted to build and sustain a competitive edge in the moulding of domestic appliance through restructuring of the company in which resulted to a change in product direction. Change in product direction enabled the company to compete in a new sector of the market i.e. introduction of product varieties.
The market strategy they adopted was to produce high quality product with wide varieties of products, in which colour range was widened and packaging improved.
comparing last year to then the market strategy worked because they were able to achieve the company cooperate objective as in Increase profit and survive competition. The outcome of the company marketing strategy led directly to capturing a large market share in which they had increase in net sales which also confirmed that their revenue and profit increased. The market strategy was able to gain a competitive advantage over its competitors in which they were able to serve their target market and in other to serve the target market.
The way in which you can know if the market strategy was successful is also assessing company performance against market requirement using key order winners and qualifiers. One of the objectives of marketing's is to increase revenue.
The retained profit from the balance sheet also increases which is important for any business. It a source of long time finances. It increase because sales where high. The advantage of this is that the company will have funds available in the event of a loss being incurred. Every company tries as much to maximize long-term profits.
Working capital increased also over the year's money can be said to be available and used for day to day operation of a firm, which is the current assets minus current liabilities stated on case study. Working capital also gives investors an idea of the company's underlying operational efficiency.
Current asset is high it implies that more is spent on inventory which is not healthy for business. The faster a business expands the more cash it will need for working capital.
Inventory level increased is a significant portion of the current assets of any business enterprises (Kruger, 2005). Inventory can be classified as raw materials work-in-progress and finished goods. Inventory is the biggest assets of any company and if not properly managed becomes a liability. Rising Inventory equal rising costs and carrying stock is expensive .The company was facing high inventory which must have resulted carrying costs which devours capital (capital the business may need for growth). Current asset is high it implies that more is spent on inventory which is not healthy for business. The faster a business expands the more cash it will need for working capital. Increase inventory to working capital is a negative sign showing the company has operational problem. Excess inventory becomes a liability.
Hill (2000) stated that "For each market in which a company wishes to compete, it must identify order-winning criteria, such as price, delivery speed or quality". Hill (2000) distinguishes between three types of criteria that define how orders are won "qualifying", "order-losing "and order winning". The order winner can be said to be those characteristics that allows a customer choose a product over another. While qualifiers are those criteria that a company must meet to have a customer consider it to be a possible supplier. William L. B et al (1993) defined "order-winners in terms of marketing as a way of describing buyer behaviour while manufacturing terms the order winning criteria represent a way of describing a market in terms of required manufacturing capabilities". Qualifiers on the other are "those criteria which a company needs to provide in order to be considered or short listed as a potential supplier" (William L.B et al 1993). Hill developed the order winner to help firms understand and improve on their market in other to prioritize their investments and developments to support the needs of the current and future market, Hill (2000). G.J.da Silveira (2005) stated in his work that for low volume process which offer a wide range of product, delivery speed and unique design capability would be order winner priorities while for high volume processes which offer narrow range standard products, and build process with low flexibility, price could focus as the key order winner which all depends on the company. This is in accordance with Hill (2000) named order-winners for high volume process (Price) while for low volume processes (delivery speed and unique design capability).which can be related to the case in study where high volume and low volume processes where used .
For the original design concept
Price: Price was the key order-winner: Hill (2000) claimed that in different market stages of a product life cycle, e.g., product introduction, growth, maturity, decline, etc., .The importance of price will gradually increase and become an order-winner criterion. (Paul Prabhaker 2001) which was the case of HQ original product it had reached saturation so in order to compete they had to mass produce in high volume so as to survive in the market marking price and order winner. Since emphasis was on low cost, so in trying to minimizing the total cost of a product less variety product was made and longer production runs was done.
Delivery reliability: It involves the ability to strictly adherence to production schedules. Roberto Sarmiento et al (2007) define delivery reliability deals with the ability to meet quoted (make-to-order environment) and/or anticipated (make-to-stock environment) dates and quantities. The company sought to achieve this by
- Reducing cycle time
- Using cheaper and less complicated mould.
- Assembly and packaging of product was completed during the moulding process at the machine which made it easier and faster.
Hill (2000) suggested that in some cases the fact that companies deliver their products on time may be only sufficient to keep them "in the game".
In terms of the new product concept
Quality conformance was an order-winner which ensures that products are made to specification. Mohammad Talha (2004) defined quality conformance as the performance of a product or service relative to its design and product specification to ensure that performance will achieve customer satisfaction. Hill (2000) emphasized that in order for goods and services to conform to agreed design. The following stages must look at.
- Determine the responsibility for complying with the specified requirement at each level in the organization.
- Control quality at the point of purchase to ensure that the bought -out materials components and service comply with specification
- Process quality control to ensure that goods or services being produce meet specification.
The company sought to achieve quality by
- By buying expensive raw materials,
- Premoulding treament of materials was introduced
- A team was trained in other to achieve standard.
- The wall thickness of new products was also increased to give greater rigidity and substance.
- Also new machines were brought to meet product mix because old machines could not meet such standards.
Product range: Offering a wide range of product variation within each brand. The company gradually diversified production by introducing variety of product. Thereby introducing flexible manufacturing. Increase in product variety will support higher levels of market orientation (F.P Williams et al 1995). Colour range was also widened to support the new product range increase colour flexibility.
Innovative Packaging: Innovative packaging and presentation accompanied the new product. The company sought out to achieve this by setting up a different assembly department. They relied on innovative packaging as a selling feature. In which their products could be differentiated from those of their competitors and can be used to add value to the product.
From exhibit 6 the cost details of representative product and the average taken in other to calculate the cost of raw material, moulding, assembly and packaging and components as represented in the table below.
The key manufacturing strategy task for the "old" products was to manufacture high volume product using low cost manufacturingIt was addressed by
- use of cheap raw materials
- Product cost was kept down which can be associated with the long production run used. The use of automated equipments (dedicated) and low process flexibility involved.
- Mould was made cheap as possible were contrasting colours where used.
- Assembly and packaging of product was completed during the moulding process at the machine which made it easier and faster.
(Ic) The company manufacturing facility supported corporate needs in producing high volume of the old products in which had reached maturity stage in its product life cycle(saturation) and in other to maintain a market share and compete in the market. Manufacturing had to mass produce their product to reap the advantages of productivity gain which were able to meet demands at reducing cost. High volume standard products produced had brought an increases emphasis on price as an order-winner in the market. Manufacturing -oriented market which was product focused. Low process flexibility and dedicated process technology are imploded in the process choice of manufacturing of mass products (Giovani J.C da Silveria 2005) in which they adopted . The Manufacturing strategy and cooperate needs were in alignment .
The key manufacturing strategy for the "new" products was
- The use of value added features which emphasized on product quality and special packaging capabilities.
- Use of product range to support new product introduction.
The company's manufacturing strategy had provided support for the order winning criteria for the new products in the follows, in other to achieve product quality they
- Invested in expensive raw materials.
- Employees from the shop floor were trained to get quality standards.
- New machines were bought and old machines sold off so as to meet quality specification.
- On the technical said due to difficulty encounted during setting-up of machine operation , unskilled labour were used and trained because recruitment from outside was fruitless .
- In other to support product range, widened range of colours was introduced.
- In terms of packaging a separate department was created from the mould shop. This specialized more on the packing and presentation of the new products.
Yes the adopted strategy has introduced a new problem for manufacturing in terms of production control problem. They are
- Greatly Increased inventory level.
- Complex production planning.
- Problem with new product introduction.
Warehousing capacity had increased due to work -in-progress and finished goods as shown in exhibit 7 which resulted in increase inventory level. Rising inventory equal rising costs for any business and carrying stock is expensive. There was misfit in profiling of products and markets, and manufacturing and investment choices.
In other to increase sales additional colours are required to break into new market and in other to meet the expected target date, normal production run are put on hold. Difficult in balancing priorities between original and revised product concept.
A modified manufacturing strategy can be developed using the methodology proposed by Hill (2000). According to Hill (2000) stated "that manufacturing strategy represents a coordinated approach which strives to achieve consistency between functional capabilities and policies for success in the marketplace". It was also stated that structural and infrastructural issues are two key factors that affect manufacturing strategy. Structural issues are concerned with putting in place the process and technology for operation whereas infrastructure provides it with long-term competitive edge by continuously improving upon human resource policies, quality systems, and organization culture and information technology. In his methodology he outlined five steps used to develop a manufacturing strategy they are as follows
- The choice of alternative process
- Trade-off embodied in the process choice.
- Capacity size
- Role of inventory
- Make or buy.
The process choice should be one that focuses on process capability and flexibility. The production of High quality product with improved packaging. A linked batch process is proposed for the process since manufacturing key task is based on quality. Accord to Hill (1983). The batch process is a transition between low and high volume activities. It contains a mixture of both jobbing and line characteristics. For the packaging stage, a plant within a plant approach is proposed, final assembly and packing must be located need mould shop.
Make or buy: Make- to -order, in other to control the increasing inventory level, since the new product are packed in inner boxes that take up space, Components needed to assemble the new ranges of product are greater and quality is emphasized . Manufacturing should introduce a make- to- order so as to curtail the increasing in inventory.
Trade-off: Trade-off between performances at the same time for example the product quality together with lowering of the production costs and the lead times, following reduction in waste, reworks and control. Shahbazpour and seidel (2006) defined trade-off as the "constraints or obstacles that must be removed in order to reach higher levels of performance. They stated that identification, improvement and elimination of trade -offs must become the focus of the manufacturing improvement process towards enhanced competitveness". Da Silveria and Slack (2001) viewed trade-off as "pivot" type models. They suggested that the attributes of the manufacturing system make up the "PIVOT" of the trade-off while the resources and capabilities of the system form the "base" of the trade-off. Improvement is achieved by either enhancing the system attribute (i.e. "raising the pivot") or improving operation capabilities and resources (i.e. "raising the base"). In this case study of low volume product the trade off will be the capital cost of purchasing a new machine with a microprocessor control versus degree of service from the technical team. While another can is the capital cost of keeping inventory versus reduced moulding capacity, Low cost production versus high quality. When trade-offs do exist it is critical that practices implemented to achieve one competitive priority do not have an adverse effect on another.
Role of Inventory- Low inventory reduction is needed since a make- to -order position is been proposed so as to reduce cost of maintain inventory. Since investment made on cost of raw materials and large mould is high. So to control cost a low inventory level needs to be maintained. Inventory is an asset and can add value to and order winner, but when not properly managed it becomes a liability .So new inventory policies should be implemented.
Capacity- The new manufacturing task was able to reduce moulding capacity. This makes the process easier to control. Keeping capacity in balance is essential to ensure future growth can be sustained.
Infrastructure - provides it with long-term competitive edge by continuously improving upon human resource policies, quality systems, and organization culture and information technology. Hill (2000).
Organisation and work structure - A decentralised structure of organization. A decentralised, team-based organisation that is orientated around its customers.
Manufacturing systems: general purpose equipment proposed, manufacturing must be flexible in other to respond to increase product diversity. Accordance with Blois K.J (1988) for Manufacturing systems to respond to increased product diversity and shortening product life cycle flexible manufacturing should be introduced ,to provide the set of manufacturing capabilities which enable a variety of marketing strategies to be achieved and less expensive are recommended, unlike the large mould which are expensive .
Team based and customer oriented
According to hill (2000) "To effectively link manufacturing strategy of winning criteria" he proposed the order-winning criteria to help mangers to improve understanding of their market and to prioritize investment and development to better support the needed order winner. Manufacturing strategy providing the winning criteria will be able to select the process choice suitable for manufacturing. While in manufacturing terms the order winning criteria represent a way of describing a market in terms of required manufacturing capabilities. Manufacturing strategy leads to operational decisions that results in desired performance. The type of manufacturing strategy a company choose to use should be dependent on its chosen order winner. In which manufacturing functions will be expected to support, by introducing structural and infrastructural decisions that are attached with the capabilities of the order winner .This order winner enables companies to compete at the market level. Aligning the capabilities of manufacturing with the key order winners will maximize the competitiveness of a firm. In the case study of the original product the manufacturing strategy used was successful because the right manufacturing technology was used to achieve particular desired capabilities. The right process choice .While for revised concept it failed because of inappropriate processes, or a misaligned infrastructure. The correct choices of manufacturing process can lead to a focused manufacturing, from which superior performance will be derived. The importance of understanding order winning strategies comes from previous research that emphasize that there must be a fit between marketing (order winning strategies) and manufacturing decisions (i.e. integration) to support competitiveness Hill (2000). Once order winners are clearly understood, then "appropriate manufacturing strategy can be dafted and implemented. Order winners are means to win orders (or qualify for) and identifying manufacturers' order winner has long been considered a key element in manufacturing strategy research (Hill, 1993). The manufacturing strategy should be the one "that fits the business, that is, one that strives for consistency between its capabilities and policies and the business's competitive advantage". In conclusion manufacturing strategy has a big influence on choosing the order winning criteria because because it helps to determining manufacturing capability that needs to be employed to achieve competitiveness so that there is a fit in the process.
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