The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage by Yosef Sheffi

Author:Yosef Sheffi [Sheffi, Yosef]
Language: eng
Format: epub
Tags: Business & Economics, General, Management
ISBN: 9780262195379
Google: bfh2QgAACAAJ
Publisher: MIT Press
Published: 2005-07-15T00:35:27.608012+00:00

Redundant Capacity

Instead of using inventory for redundancy, some enterprises use redundant capacity for mission-critical business units. Boston Scientific manufactures an array of high-tech medical devices such as drug-coated stents that prop open the arteries of heart patients and help keep them blockage-free. For these specialized products, the company uses an array of sophisticated manufacturing systems to laser-cut nickel-titanium tubes into the delicate yet strong meshes that then receive the company’s patented coatings. The nature of the product, and FDA regulations, specify meticulously clean and controlled production conditions. Each lot of stents must be traceable, requiring some 40 pages of paper-work to certify when, where, and how the devices in the lot were manufactured.

Were Boston Scientific to suffer from a disruption of its manufacturing facilities (e.g., a fire, industrial accident, or contamination), the company knows that the time to fix and recertify a disrupted facility could leave the company without a major portion of its revenues and profits and allow its aggressive competitors to take Boston Scientific’s market share.

After assessing its vulnerabilities, Boston Scientific built redundant production lines for some of its most important products. These alternative manufacturing facilities are kept FDA-certified and ready to go in the event of a disruption. The company also has personnel who maintain the skill levels needed to operate those redundant lines. Although such redundancy is not inexpensive, the company realized that failing to maintain redundancy risks the entire company and decided to protect itself against that risk. Other companies aim for less than 100 percent capacity utilization rates on their existing production lines, reasoning that the unused capacity acts as a cushion to absorb unanticipated large orders.8

Yet other companies, such as Helix, a maker of highperformance vacuum pumps, rely on their suppliers to provide extra capacity. Helix used Demand Flow Technology,9 in part, to segment its manufacturing processes into short, easily taught steps that in an emergency can be transferred to others (see further discussion in chapter 11). Having analyzed the capacities and capabilities of suppliers, Helix knows that it could quickly teach certain suppliers to make its products.

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