Topic: “In a news article titled, Shifting Gear: Chrysler Gains Edge by Giving New Flexibility to Its Factories (WSJ, 04/11/2006) presented the benefits and case for flexible manufacturing.
Comment on the advantages and disadvantage of flexible manufacturing? Comment on the scope economies presented in the news article? What does the existence of such economies imply about the production of autos in growing fragmented market? In the news article, “Chrysler Gains Edge by Giving New Flexibility to Its Factories”, more emphasis is placed on how Detroit’s Big 3 and especially Chrysler is catching up with its Japanese rivals by adapting flexible manufacturing and saving up a chunk of the fixed costs involved in car manufacture.
One important point stated in the article is that mega-selling cars are now rare and that it is important to serve the buyer’s appetite by offering a wide array of models of cars to have a competitive advantage in the market.
The possibility of producing a variety of vehicles in the same plant is one short way to describe a plant’s flexibility or flexible manufacturing. One advantage of flexible manufacturing systems is almost certainly the variety of products that it can produce and the benefits it offers to the customers apart from attracting them towards the brand. The use of robots sometimes in flexible manufacturing and as even mentioned in the article cuts down production time drastically because of the speed the materials are loaded, unloaded and transferred from one to another.
Another advantage would probably be the low fixed costs as compared to operating several different plants for each model the company manufactures. It is certainly more efficient to have one single plant that makes multiple models of cars and runs at close to full capacity rather than having different plants to manufacture each model that run less than capacity. The operating, maintaining, labor and fixed costs significantly decrease when these plants are consolidated. One significant disadvantage of flexible manufacturing gets passed on the bottom line labor.
It is possible to make flexible manufacturing profitable mostly only when there are multiple shifts in a day. The workers would be forced to work in shifts that are not desirable to them to keep their job and the plant running, when earlier each plant could operate at any shift they desired to meet required demand on time. To be able to accommodate and manufacture different kinds of vehicles in the same plant, there is huge initial investment involved in the same plant which can be a risk if there is excess supply and not enough demand.
Flexible manufacturing requires use of robots to be optimal, hence substantial pre planning is required on the part of the company as well as the partner who aides the manufacturer with the technical robotic supplies. For example, in the case of Chrysler, the company ABB needed to be well versed of their manufacturing processes to be able to effectively provide them the technical expertise to be able to manufacture multiple models in the same plant and save up on their manufacturing time.
At the end of the day of course, the company aims for higher profits which is possible through reduced costs and flexible manufacturing does exactly that by reducing the price per unit manufactured enabling a company a higher margin of profit. Economies of scope is “An economic theory stating that the average total cost of production decreases as a result of increasing the number of different goods produced. For example, Proctor & Gamble, which produces hundreds of products from razors to toothpaste.
They can afford to hire expensive graphic designers and marketing experts who will use their skills across the product lines. Because the costs are spread out, this lowers the average total cost of production for each product. This theory implies that big auto manufacturers definitely pose an advantage over smaller manufacturers that compete with them because most of their costs can be shared amongst the different models they produce.
For example, their marketing can be done with the same ad agencies or even their own marketing department as compared to a smaller company that manufactures only a few models will require to operate a marketing campaign/department only for those few models whereas a big manufacturer can divide this costs evenly for all the models it manufactures. This would imply in the future for more smaller companies coming together and merging to share costs so as to increase their profit margin.
Cite this Flexible Manufacturing
Flexible Manufacturing. (2016, Oct 26). Retrieved from https://graduateway.com/flexible-manufacturing/