Six Steps to Create a Production Strategy

What are the most important responsibilities of a production manager? According to my perspective, they include:

  1. Recruiting innovative personnel
  2. Formulating a strong, long-term vision, and a strategy to fulfill this vision
  3. Demonstrating the company's commitment to the strategy in everyday situations

While you may be investing significant effort into the first task, this article aims to guide you in excelling at the remaining two.

Part 1

Most companies endeavor to improve their ability to adapt to changes in the business environment. In today's globalized economy, market fluctuations and shifts in customer preferences can have rapid effects on demand patterns. This impact is almost instant in production, particularly since inventory levels are typically kept low.

It is crucial for everyone in production to adapt and respond quickly to these changes. In many companies, employees have adapted to this requirement for flexibility, which aligns well with the lean philosophy and is considered both healthy and natural.

But what about long-term planning?

Despite the need for flexibility, it's essential to maintain a balance with long-term planning. Otherwise, over time, the lack of long-term strategy could have serious repercussions.

Generally, short-term planning is effective in many companies, with operational decisions made daily at all levels of the organization. Medium-term planning could perhaps be more frequent but is usually addressed during budgeting.

However, long-term planning often falls short in many companies. If our operational and tactical decisions aren't aligned with a strategic plan, we risk losing control over events, becoming more reactive to external factors. If this pattern continues for several years, it can lead to stagnation in production development.

Consequences of a Lack of Strategy

When a company lacks a long-term strategy, the indirect impacts can manifest in multiple ways. Here are three examples:

  1. Difficulty in executing projects: Without an overarching plan, there's a risk of launching too many projects at once, making it hard to prioritize and allocate appropriate resources. The projects' objectives can also become unclear as it's hard to see the larger picture of the company's direction.
  2. Expensive maintenance: Maintenance improvements require long-term effort. Without a strategy, either reliability is compromised or costs escalate excessively.
  3. Inefficient production: Absence of a long-term plan can hinder productivity. For instance, if your system support and production flow don't adapt at the same pace as the product offering changes, maintaining efficiency becomes challenging for the production staff.

According to a research project by Stratego in Sweden, 52% of production companies lack a concrete production strategy. Even among the 48% that claimed to have a strategy, many considered it insufficient. Some only had guidelines for "growth and cost control" but lacked a plan to realize these objectives. However, the best companies had a clear development plan, featuring quantifiable goals – an aspect that should ideally be self-evident.

Part 2 - Identifying the Strategy Shapers

Pinpointing who holds the responsibility for strategic thinking in production might be a challenge. Front-line managers often have a large workforce reporting to them, and their focus is generally consumed by immediate tasks such as managing deliveries, ensuring safety, and handling personnel issues.

Unfortunately, upper-level management often gets embroiled in day-to-day operations. While being visible and involved on the production floor is a positive and necessary factor for the success of lean projects, over-involvement in operational minutiae can lead to micromanagement, undermining the autonomy of the organization in problem-solving.

Many companies enlist the assistance of roles like lean coordinators to bolster their strategic efforts. While such roles add value and strength, their expertise is often too foundational to independently outline a comprehensive action plan for the entire unit.

The duty of instituting a production strategy naturally falls to the Head of Production or someone in a comparable position. To assist them, an experienced individual should be enlisted to compile robust data that will inform decisions in collaboration with key personnel in the organization.

The strategy must be collectively approved and endorsed by the entire management team, as its implementation will be their responsibility.

Adopting a Holistic Viewpoint

To devise a development strategy, it's necessary to elevate your thinking. You need to momentarily set aside the unpredictable elements of the daily production environment – machinery layout, breakdowns, culture, and habits.

To foster the required creativity, envision the entire factory as a single machine. This machine has customers that require a certain quantity and quality of products. In the future, the demand will evolve – new products will be sought, there will be more customers, and quality expectations will rise. The strategy should outline how we can efficiently meet these evolving demands.

The production department holds a comprehensive view of the production process. However, delegating the formulation of a production strategy to the planning department may be counterproductive. They often focus on optimizing current production using existing technical apparatus, and may lack insights into potential developments.

Therefore, we need a more extensive development strategy. This strategy should encompass planning aspects, technical advancements, shifts in working methods, and effective utilization of IT support.

Part 3 – Six steps to create an efficient production strategy

Step 1 – Set challenging long-term goals

Normal efficiency improvement rate is often around 6% a year. Many companies can handle this level with their normal capacity to expand. 6% a year over five years represents an improvement of 34% over the period.

This means that, if your aim is to increase productivity by only 34% over five years you will not need any development strategy to achieve it!

World-class companies manage to sustain improvements in the production of 15% a year. This equates to a doubling of production over a five-year period. If you set this type of target, you will need a strategy to succeed. Let's start creating!

Obviously one goal will not be sufficient. If you only focus on productivity increase, it is easy to come up with solutions like "tear down the factory and build a new one". You need a ceiling for investment levels, stock levels, and total costs.

Step 2 – Identify an expert

The ideal expert is someone you trust. It could be someone who works for the company, or it could be a consultant.

The important thing is that the personal chemistry is right. Your expert must be able to work together with you and mix with your associates at all levels.

Your expert must also have a broad knowledge base. To have undertaken a similar task earlier is an obvious requirement as is being fully conversant with all aspects in the lean toolbox. If we're dealing with the production process he/she also requires an understanding of other ways of getting results, such as Six Sigma, production-related IT solutions, maintenance, and production finance. Every challenge is unique, so it's a case of not falling into the same old rut as before.

A knowledge of your specific industry is of course desirable, but the most important aspect is that your expert has experience from several industries so that he/she can distinguish between what is related to your industry and what is generally applicable.

Step 3 - Pinpointing High-Potential Areas

Every production strategy should be tailored to the unique circumstances of the company. Companies often have a focus on cost reduction and growth, making it beneficial to scrutinize financial figures to identify areas with the most potential.

With the assistance of your expert, conduct a thorough examination of each cost area and calculate potential reductions per unit produced. Different industries will see various potential savings areas; some might find it in reducing raw materials or energy consumption, others in decreasing per-item personnel costs, and others might discover it in maintenance costs. Subsequently, determine how production improvements could boost sales, such as through better supply reliability or enhanced product quality.

This exercise will help identify where to direct your resources to achieve your goals and allow you to fine-tune your focus.

Step 4 - Crafting a Comprehensive Situation Analysis

The subsequent step is to formulate a thorough situation analysis. This phase calls for serious effort from your expert. A detailed examination covering the entire production function is recommended. A shallow analysis might only suggest further studies without providing a clear direction. Precision is especially crucial in areas with significant financial improvement potential. The analysis should consist of a "hard" and a "soft" aspect.

The "hard" aspect hones in on measurable factors and encompasses areas such as:

  • Technical capacity: this includes production efficiency (OEE), stability, utilization, and shift work.
  • Costs: this includes shortage costs, quality costs, and maintenance costs.
  • Capitalization: this includes setup times, lead times, and batch sizes.
  • Bottlenecks: identifying where and when they occur.
  • Layout and flow.
  • Personnel requirement per unit or process.

The "soft" analysis can be based on interviews and aims to reveal vital but less quantifiable factors. This analysis attempts to answer questions about:

  • Work styles, culture, and cooperation.
  • Standardized working methods.
  • Care and cleanliness of the equipment.
  • How improvements are implemented.
  • The capacity and experience available to execute necessary projects.

Analyzing the gathered material can help identify strengths and weaknesses. It can also document improvement suggestions and calculate the potential size of high-potential areas.

Consult with personnel about the situation analysis to verify the quality of the findings and offer them relevant feedback.

STEP 5 – Craft the Strategy

Rooted in the detailed situation analysis, your strategy will take shape. Your expert, collaborating with a working group, will explore different scenarios, sketch alternative layouts, calculate results against targets, and evaluate feasibility. This needs to be a continual, multi-functional process.

A single toolset is rarely enough to achieve your goals. Often, a range of relevant tools is required to accomplish your objectives efficiently. Here are a few concrete strategies that might be part of your development plan:

  • Enhancing process stability through statistical methods for fine-tuning operations and implementing an automatic overall control system
  • Identifying the most relevant key performance indicators, like OEE measurement
  • Deciding how and when to use IT support for fact-based decision-making, optimization, and automation of labour-intensive processes
  • Understanding how bottlenecks occur and determining where investments are necessary
  • Improving layouts and flows to minimize unnecessary operations and free up space for new production
  • Reducing lead times and tied-up capital by scrutinizing setup times, paced flows, leveling, and introducing a Kanban system
  • Reevaluating the roles of machine operators to enable them to manage multiple machines or prepare for the next order
  • Enhancing reliability through expanded maintenance tasks

However, simply listing these actions is not enough. Each measure must be thoroughly outlined, including what needs to be done, when it needs to be done, and what resources will be required.

STEP 6 – Visualize and Validate the Development Strategy

Present your development strategy in a format that's easy to understand. You could use a Gantt chart to highlight key tasks, create a 3D representation of the new layout, or develop impactful presentation materials.


The strategy should not be seen merely as a document used to kick off projects. It should serve as a guide to ensure that daily operational and tactical decisions align with the long-term goals. As the head of production, your role is to ensure that the organization has the necessary prerequisites to achieve its objectives, facilitating long-term planning and reactions.

Your expert aids in this journey by providing training, coaching, and advice.

By Oskar Olofsson

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