Development of efficient value chain after product development

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Academic of Innovation, Design and Technique

Development of efficient value

chain after product

development.

Bachelor Thesis

Basis Level, 15 hp

Innovation, production and logistic

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Abstract

The focus of this thesis is to analyze the management of supplier relationships in a supply chain and develop cost-effective processes for manufacturing of a finished product at a global company in Sweden. The study was initiated when the application of literature was of interest to one of the company's products that is under development. So far, the company's great focus has been on developing the product and getting as close to the finished product as possible. Equal focus has not yet been focused on managing suppliers and on defining the processes that arise after the finished product. The intention has been to facilitate decision-making in supplier management and manufacturing that will arise when the prototype will become a finished product and will be launched on the market.

The aim for this study is to analyze the value chain in order to develop and check various production facilities to create opportunities for cost savings.

- RQ1. How does a good manufacturing strategy help in developing cost efficient products?

- RQ2. What are the challenges in developing a value chain containing several external suppliers?

The approach applied in the study has been a review of scientific literature that provides a basis for answering the purpose and the questions that have been created. Data collected from the literature have been critically reviewed and adapted based on the purpose of the work and the empirical findings collected from the company. Data collected from the company in the form of interviews and observations have been regularly analyzed.

The differences and similarities that exist between the empirical data and the literature have been elucidated by adapting the analysis to a pattern. The analysis provided a basis for the results where the development of two different concepts that can be used as an approach in the future could be created. The concepts were created and analyzed based on the company's prerequisites for applicable solutions. The results from the analysis were then summarized in results and recommendations with the categories: Value Stream Map, Hypothetical Production Line and Recommendations related to the modules of the product. These categories will facilitate decision-making regarding the choice of production in the future. Concepts that will facilitate decision-making for economic factors and process factors have also been developed as a “guideline” for approaches to supplier management and management of financial aspects.

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Preface

This degree project at bachelor's level was carried out during the author's studies in the university engineering program in innovation, production and logistics at Mälardalens University. The motivation within the studies has always been to create value for actors in the engineering industry. Getting that opportunity from a globally active player has

contributed to valuable experience and a step into the role of engineer.

I would like to express a big thank you to the company and above all to my supervisor at the company who with his openness and enthusiasm has been the contributing factor to this study being able to be carried out. I would also like to express a big thank you to colleagues on site who lined up for interviews and contributed information that developed this work.

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Abbreviations

IDT Academic for Innovation, Design and Technique MDH Mälardalens University

JIT Just in time

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1. Introduction

In modern times, it has become increasingly common for entire supply chains to compete with each other rather than just individual companies competing with each other. It has been mentioned that finding a suitable manufacturing strategy is important to achieve as high competitiveness as possible (Christopher, 2016). In order to create opportunities for cost savings, this study intends to analyze, develop and check various production facilities. In order to create cost effective suggestions, one must have a bigger understanding of the manufacturing strategy, by investigating and mapping how international complex connections can be maintained.

1.1 Background

Different activities within the value chain and customer value directly impact the costs; therefore, these are important terms to consider in the development of the manufacturing strategy which is itself a crucial factor in maintaining delivery service, competitiveness and profitability (Jonsson & Mattsson, 2016).

To create and maintain competitiveness, a proper flow of materials needs to be maintained. This can be done with, for example, just-in-time deliveries and flexible production systems that can meet customers' complex demands (Negri et al., 2017). Logistics is a term that can be defined as internal and external transport, parts of the value chain and storage of materials. All internal and external processes from warehouse and factory, to transport and material handling can be considered as logistics (Zijm et al., 2019). The material flow in a company is often regarded as a significant process but guarantees that value-creating processes are done correctly. The material flow has, for example, the task of delivering operational units as equipment that must be available in the right place at the right time. The material flow is considered a significant process as it is the process after the main process and has the task of maintaining the main process. The flow of materials is based on the commitment of the human factor, which means that quality, which is a key factor, is based on how well the work is performed by employees (Schulze & Wüllner, 2006).

The main goal of the material flow is to have a continuous flow without interruption and unnecessary stock. Having a continuous flow means that the right product is delivered to the right place at the right time. There are many factors that can cause irregularities in the material flow, including overproduction caused by too large volumes that does not match the demand (Harrison & Hoek, 2008). According to Liker (2004), overproduction is one of the main types when it comes to non-value-creating waste.

Lean production is a philosophy and a manufacturing strategy that originates from the Toyota Production System (TPS) and can be used to analyze the process and identify waste at an early stage in order to be able to reduce or eliminate waste and get a steady flow through the processes. By applying Lean thinking, the process is examined, identification of deviating patterns in the process (waste) and solutions that can be implemented (Harrison & Hoek, 2008). According to Liker (2004), successful identification and elimination of waste can be achieved with the help of lean-tools such as 5S, Just-In-Time (JIT), Value Stream Mapping (VSM) and Kanban. The success of Lean lies mainly in the philosophy of a well-founded

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understanding of people and their motivation. Being an organization that constantly wants to improve and learn is the basis for Lean and to maintain competitiveness.

According to Liker (2004), the Lean method can be defined by five steps: - Identify the value for the customer

- Identify the flow of value through the organization - Create a flow of value

- Use a pull system

- Work towards excellence

Today's constantly growing demand for high-quality products means that Lean production has often been the chosen production system to implement (Rose & Rahman, 2011). It has become an increasingly globalized world where the competition to produce modern technology-equipped organizations is constantly growing. Today's modern technology has led to the number of organizations growing as it has facilitated to deliver products all over the world. With a large selection of suppliers, customers have a greater authority to be able to choose or negotiate with suppliers. Suppliers therefore make efficient use of available resources to stay competitive (Rose & Rahman, 2011). One consequence to consider in globalization is that value chains today are becoming increasingly complex and one must focus on logistical aspects by finding optimal solutions for managing logistics networks, distribution channels and activities (Creazza & Melacini, 2010).

Careful investigations and measurements of value chain costs such as transport must be made as these activities can be extremely complex and costly (Creazza & Melacini, 2010). By coordinating delivery service and logistics costs that are highlighted as two key factors, customers' needs can be met. At the same time, another aspect that has recently received increasing attention must be considered, the environment. Customers demand for quality products with a small impact on the environment has increased and customers' behavior around them has changed. Among other things, people today are willing to pay more for an environmentally friendly quality product. By involving the customer at an early stage with, among other things, logistics-related issues, this can lead to future complications being avoided (Zhang & Wang, 2015).

1.2 Problem Formulation

To contribute to development and obtain value creation, it is important that companies collaborate with suppliers. All activities in the value chain, both the activities that help to create a finished product and the activities that support other activities are important and create value for the end customer. Good collaboration with suppliers is the key factor to long-term successful profitability (Espino-Rodríguez & Rodríguez-Díaz, 2014). In order to obtain competitive advantages and cost efficiency, Jonsson & Mattsson (2016) believe that close cooperation between actors in the supply chain plays a major role.

The case company concerned has not started to look at the processes after the product is finished. The biggest focus has been on developing the product, which is still a prototype, but everything that has to do with manufacturing and supplier management has not yet been looked at. This study will therefore facilitate decision-making regarding the manufacture and

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handling of suppliers when the product is fully developed and will begin production. This will be done with the help of theory that is adapted to the product's different properties.

1.3 Aim and Research Questions

The aim for this study is to analyze the value chain in order to develop and check various production facilities to create opportunities for cost savings.

RQ1. How does a good manufacturing strategy help in developing cost-efficient products? RQ2. What are the challenges in developing a supply chain containing several external suppliers?

1.4 Delimitation

Due to the short time frame for the work, no comparisons with other similar projects have been made, but the study has focused on the current project at the company. As the process after the finished product has not been identified or started yet, the literature collected has been a hypothetical collection that may suit the company in the future. By starting from the literature and having a red thread through the work, the focus has been on identifying challenges with external collaborations and saving on any costs that may arise when the finished product is to be manufactured. To increase the reliability and keep the report easy to read, academic studies and scientific articles have been used. Interviews and regular meetings with staff and managers who have developed the product from the start have led to a delimitation being made to achieve the best possible exchange.

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2. Approach and Method

2.1 Data collection

Below are the methods used for data collection.

2.1.1 Unstructured Interviews

A qualitative data collection with the help of unstructured interviews was regulary done at the company during the course. The data collected by recording parts of the meetings and analyzing the data afterwards. The interviews were directed at employees at the company whose skills suited the research topic and were relevant to the research questions. Bryman (2008) believes that unstructured interviews are a flexible interview style that gets answers to freely discuss the topic asked but are at the same time critical to the risk of answering can interpret or base the questions on external contexts. The person who conducts the interview can, however, do what he or she finds relevant for the research topic and exclude the rest.

2.1.2 Semi-structured interviews

Semi-structured interviews were also conducted to obtain answers to more specific questions related to the research topic. The questions asked during the semi-structured interviews had a certain standardization and a strict objective (Bryman, 2008). The person interviewed during these interviews was a person who has a great responsibility with a role that concerns decision-making. Both the unstructured and semi-structured interviews contributed to the development of the empirical findings linked to employees with functions that affect the boundaries of the research area.

2.1.3 Observations

To make feasible efficient data collection of empirical data, an unstructured angle of approach was primarily used to obtain an overall picture of the empirical data. After that data was analyzed, then, at a later stage, specific data could be searched through structured organization. The observations that were made contributed to a significant understanding of the company's various processes, values and special terms.

2.1.4 Secondary data

Secondary data that contributed to that basis of the theoretical frame of reference have been received via databases such as MDH Libary, ProQuest, ASCE Libary and Science Direct and the keywords have been Value Chain, Supply Chain, Cost-Effective Products, Processes after Finished Product and Manufacturing Strategy. According to Bryman (2008), irrelevant facts can be ruled out by regularly working on the issues during the work.

2.1.5 Collection of documentation

During the work, documentation such as measurement data, a financial overview, planning data, etc. have been collected. The collection has taken place via supervisors at the company with a restriction on real-time data that is relevant to the research topic. As the study is directly linked to manufacturing after the finished product, measured values have been obtained and analyzed strictly objectively without affecting one's own interest, similar to Bryman (2008).

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2.2 Analysis of data

The internal validity of the study could be strengthened by linking empirical data with theory using the analysis method pattern matching. The pattern fit could be performed by comparing the empirical findings with the theory collected and a data analysis could then be performed. The analysis in the report was divided into two parts to clarify the relevance of the issues. This led to the parts redefined by the issues being effectively removed from the report. A division of the analysis also led to a division of the results to clarify the answer to the questions (Yin, 2007). By matching each reference in the theory with the empirical data, similarities and differences could be defined.

2.3 Development of frameworks

Eisenhardt (1989) contributed to theory development through a clear template for how frameworks can be designed and seen as a number of systematic process steps to achieve relevant results where the framework is implemented. He describes the process steps that were carefully followed in this study as follows:

1. Define research questions with reasonable limitations that are created for data collection. These must be based on relevance to the research topic.

2. The information for procurement and the observations that are made must be defined based on the focus of the study and the population of the company.

3. The theoretical basis framework will be strengthened by ensuring a variety of methods used for data collection.

4. A regular analysis of data during the time when data is provided.

5. A strong basis for the new theory can be constructed through a comprehensive final analysis.

6. Based on the analysis of empirical data and theory, questions can be created.

7. By implementing contradictory literature, a critical review can be made and strengthen the validity.

8. Based on the compilation of the case study, a development of a conceptual framework can be made.

Eisenhardt (1989) believes that in some cases theory can be problematic because it can tend and become complex as the basis of the theory is based on qualitative collection and empirical observations. By strengthening the theory and basing it on empirical evidence, the method can be easily tested and facilitate the answers of the questionnaires that have been constructed.

The study for this thesis has been based on this theory method to increase the reliability of the report. The research questions that have been designed have been adapted to problems that exist at the case company. All data collected and all observations made have since been regularly analyzed. The theory requested by me as an author has been based on the problem and becomes a strong basis for finally being able to draw conclusions about a particular question or problem affecting the company.

Lundberg (2015) believes that continuous improvements that can be made to develop a framework and a business can be made through three different activities:

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- Theoretical reformulation: A framework can become more specific, reformulated or more easily based on the complexity of the existing situation by comparing different ideas around a case or creating new ideas from the current framework.

- Develop existing framework: The framework is developed and can go deeper into details by collecting more theory that is specific to the case. In this way, data that is not relevant can be deleted.

- Critical review of the framework: A critical review of the framework can be carried out by asking critical questions about deviations and missing data collected.

These three activities around data collection have given me inspiration and made me develop the theoretical framework in three different ways. First, the most important thing was to collect relevant data about the area concerned. After collecting a lot of data and having a strong basis of theories, data could be delimited to have only the most relevant data left. In this way, a pattern fitting could also be made and data from different authors could be compared and developed. When all data was collected and delimited in the theoretical frame of reference, a critical review could be made and the theory was delimited even more. By using these three activities, the theoretical framework could be continuously improved and developed.

2.4 Validity, Reliability & Triangulation

This thesis was carried out part-time and lasted for six months. This freed up time for the author to ensure the reliability of the study's theories and to link it with the empirical observations. According to Bryman (2008), there must be a great correspondence between observations and theory, which internal validity stands for.

By always having a complete description of all phases through the work, the report's reliability has been strengthened. This means that external researchers, by reviewing the work and using the same methodology, can get the same results. The objectivity of the interviewees at the company has been able to be critically examined through the unstructured interviews that led to the production of the empirical data. This is because a person may have an influencing subject that can affect the validity of the result. An external influence could be reduced through the specific semi-structured interviews that were standardized and had a clear purpose. Through this interview style, respondents' answers became more sincere (Bryman, 2008).

The triangulation in this report consists of unstructured interviews, theoretical data and statistical data collection which through these methods led to a certain degree of triangulation in reports. In this way, triangulation could be ensured (Bryman, 2008).

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3. Theory

3.1 Value Chain

The value chain is a tool used for strategic planning in a company where the purpose is to make as large a profit as possible by reducing costs. The value chain describes the activities that create value in a company. Value can be defined as the cost that customers are willing to pay for a product or service. A higher customer value can be achieved by the company performing activities in an efficient way (Madudova, 2017).

The basis for the value chain is performed by several different sections in a company where the main purpose is to create customer value by achieving the highest possible performance. Through close cooperation between each section in a company, the effect of the value chain can be clarified, while poor cooperation can have a negative effect on the entire chain (Ellegaard et al., 2003).

The two different sorting activities that exist in the value chain are called primary and support activities. The physical flow in a company consists of the primary activities, such as production, marketing, sales and logistics, while the supporting activities can be leadership, purchasing resources and research / development. Each section that exists in a company can be seen as part of the chain that has the task of performing various value-creating activities (Madudova, 2017).

3.2 Economic Models

Economic models are models that focus on economically measurable variables, where the goal is to have cost-effective relationships between companies and other actors in the market. Great focus is on the transactions between subcontractors, suppliers and companies in the value chain. The goal of the economic model is that the company, with the help of cost-effective relationships, should be able to maintain its independence and at the same time play and utilize the market in such a way that it creates dependencies and weaknesses in other actors / partners (Ellegaard et al., 2003). Behavioral models, unlike, economic models focus more on behavioral variables, but must also be used to complement economic models in order to see the whole picture and exploit the full economic potential. Ellegaard et al., (2003) believe that the economic models do not include the whole picture themselves, but need to be supplemented by the behaviorist models.

3.2.1 Transaction Model

With the transaction model defined by Williamson (1985), the focus is placed on reducing the costs that are spent on the products that move from actor to actor in the value chain. Ellegaard et al., (2003) believe that there is a relationship of discrete transactions between company and supplier with the transaction model based on two extreme points:

- Traditional market approach where the governing factor is price and there is no deeper relationship between company and supplier.

- A binding relationship in the value chain where the company owns the suppliers and controls them completely.

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Transaction cost includes the cost for the customer to be in the exchange relationship. This can, for example, be anything from operation and development to the maintenance and construction of a facility. It is then the buyer's job to minimize costs that arise for managing the relationship between the company and suppliers and get the desired product on time. By applying this culture and considering this approach throughout the supply chain, direct optimization of costs and amount of work can take place and the desired quality requirements for the product can be achieved while reaching the lowest total cost at the end of the value chain (Ellegaard et al., 2003).

This model presupposes that every decision made is based on economic reasoning. The company should act rationally and opportunistically and control mechanisms are needed to protect the relationship from opportunism. Donaldson (1996) agrees with this and believes that control can take place with the help of contracts or join investments. He also mentions that the relationship is largely controlled by power, price, opportunism and risk aversion and that a balance between these can lead to a good relationship with mutuality and cooperation. Donaldson and O’Toole (2002) & Saunders (1994) argue that a relationship between business and supplier must be considered in terms of cultural and social aspects as well as economic and technical aspects. He believes that the human factor plays a major role as norms from human interactions define control mechanisms and minimize the risk of opportunism. For this reason, behaviorist factors should be considered and based on one and the same goal.

3.2.2 Competitive Purchasing

With competitive purchasing, the company issues an order request to a number of competing suppliers that they believe can meet the quality requirements and the suppliers are then allowed to compete with each other to obtain the contract. In this way, the purchase price is pushed down and the supply is secured. Spekman et al., (1998) believe that business partners must be interchangeable, otherwise there is a risk that they become too important and can act selfishly if given the opportunity.

An application of this method should, according to the theory, lead to the most cost-effective product being achieved as none of the suppliers participating in the competition will be able to demand more payment as the risk of being replaced is high (Cox, 2004b). In all probability, the supplier with a high profit margin and the lowest production cost will win the order and start a collaboration with the company. Spekman et al., (1998) believe that with this method, subcontractors are continuously developed by reducing production costs and being flexible in order to be attractive to companies. Palmer (2000) mentions that an application of Darwinian theories to purchasing situations has led to an increased motivation of companies and their opportunistic actions. He believes that there are good reasons to cooperate and consider variables such as repeat business, goodwill and a broader network.

3.2.3 Behavioral models

According to Donaldson and O’Toole (2000), the behaviorist models mentioned earlier consider social aspects, mutual cooperation / dependence and history. It also happens that behavioral models are not only based on the dual perspective but as the network approach looks at the matter means that the company must be seen in the context of the network it is

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part of. Network theory focuses more on what the end product in the chain achieves compared to the transition theory. Ellegaard et al., (2003) believe that the product to be manufactured can, through the right choice of working methods, suppliers and bindings, achieve the right quality and cost requirements that are in demand. In this way, unnecessary costs are minimized while the product runs efficiently through the chain in an efficient and smooth way.

3.2.4 The network Approaches

According to Freytag and Mikkelsen (2007), companies can only exist as a relationship with their suppliers and customers. In this way, it is in one way or another dependent on other actors to maintain profitability and competitiveness. The company shares a network where relationships have a great value for everyone involved. Freytag and Mikkelsen (2007) believe that knowledge of the network approach is necessary for companies to define value-creating processes and value-adding activities and are described by:

1. The company's supplier relations 2. The company's internal relations

3. The company's relationship with its customers

3.2.5 The Interaction Model

According to Ellegaard et al. (2003) a relation is often affected by others, which means that the company's business operations should be seen in a network perspective as the company's value is created by the network such as relationships with suppliers and other actors. According to Leenders & Fearon (1997), decisions and actions in specific relationships of the value chain can affect the entire value chain and no longer see the term Supply Chain as a correct term, but rather a complex network where several actors have different relationships to each other.

According to Ellegaard et al. (2003), a way of managing the complex network is by first and foremost managing the individual supplier relationships but at the same time keeping in mind the consequences and impact that may arise for the other actors in the network. Cox, (2004a) agrees and believes that the dual relationship is the basis of all business transactions, while he mentions that each relationship is unique and requires a separate management with adaptation to work.

The interaction model was developed during the 1980s as a dual model but expanded to a network approach that consists of dual relationships and includes interaction between activities, actors and resources. An actor is defined as a person, group or company in the supply chain (Ellegaard et al., 2003).

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Figure 1: The interaction model (own adaptation after Håkansson ed., 1982)

In the interaction model, the view of control is an important aspect to consider, according to Ellegaard et al. (2003). In this model, the customer has no control and the relationship is governed by the interests of the company and suppliers with regard to resources, interdependence and common responsibility. In this case, the individual actors can only influence their own activities and the distribution of their resources. According to the interaction model, it is not possible to design your network and relationships in a simple way, but the company must develop with the relationship. (Ellegaard et al., 2003) connect the interaction model with social networks of private individuals where the individual cannot be controlled and categorized on the basis of belonging and dependence.

One aspect to consider is that the interaction model has been developed with regard to the European market, but empirical studies conducted by Metcalf et al., (1992) have proven that the interaction model is also implementable in the US market.

According to Metcalf et al., (1992), the basis for a good relationship is adaptations from both sides where time will create routines and determine clear roles in the relationship. The relationship and development between buyers and sellers are defined through three processes:

- Exchange - Cooperation - Adaptation

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Metcalf et al., (1992) & Saunders (1994) then divide the exchange into four elements: - Financial exchange in the form of transactions.

- Information exchange. Complex products may require a closer relationship with the exchange of information for a longer period of time. A simple product can lead to the relationship not having to be strong.

- Exchange of products or services where the complexity of the product or service affects the relationship. In this case, a simple product requires less interaction.

- Social exchange required to be able to build long-term relationships with a high level of trust. With a strong social exchange, companies know that they can help each other with, for example, problem solving and conflict management. It is in the interests of both parts to solve the problem.

Metcalf et al, (1992) believe that buyers and sellers have one and the same goal, which frees up space for good cooperation if both parties see the cooperation as a win-win. Mutual trust is of great importance in achieving the goal.

Metcalf et al, (1992) believe that adjustment can be met in how much significant investments are made in the relationship. Adaptation can take place in all areas of the supply chain, for example: in production, processes, information exchange, social exchanges or machines. According to the interaction model, adaptation is mainly affected by social exchange, product complexity and information exchange, where the goal is to create profitability through efficiency. According to Metcalf et al, (1992) can in practice regular visits by, for example, guest engineers from both sides, maintain adaptation and even change product development or create standardizations.

Another network-based model aimed at expanding the Supply Chain concept to a more network-oriented perspective has been developed by the Supply Network group at the University of Bath. The Supply Chain model is based in many areas on the interaction model as it believes that managing relationships can be interpreted in different ways depending on the properties of the complex product and the interdependence between actors (Ellegaard et al., 2003).

3.2.6 Porters Five Forces

By coordinating the complex network of activities of which the company is a part of, great competitive advantages can be achieved and in addition, Porter (1985) also believes that the value chain between suppliers and customers is highly interdependent. Cox (1999) agrees and believes that there are many benefits to both actors being interdependent. To understand structures in an industrial, five forces are used and all variables are shown in the five forces model (Porter, 1985) below:

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Figure 2: Porter's five forces (own adaptation after Porter, 1985) 1. Threats from new competit ors 2. Threats from substitut es 3. Buyers' negotiati on power 4. Suppliers ' negotiati on power 5. Competiti on in industry Economies of scale, investment costs Price for substitute Number and relative strength Number and relative strength Growth in industry Access to distribution channels

Relative price for existing product Purchase volumes Cost to change supplier Product differentiation Expected retaliation Cost of switching to a substitute Access to information The degree of differentiation in product Brand loyalty

Brand loyalty Buyers' tendency to switch to a substitute

Price sensitivity Risk of

integration in the chain Cost of leaving the industry Access to substitutes Differentiation of competitors Cost to change buyers 3.3 Sourcing strategies 3.3.1. Single Sourcing

With single sourcing, the desired product is purchased from a single supplier and often leads to more collaborative relationships between companies and suppliers. By using only without a supplier, the buyer can in all probability have a greater purchasing power and influence with the supplier. It can also lead to social and material exchanges, which in turn streamline both

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companies (Donaldson & O'Toole, 2000). It is important to differ sole sourcing and single sourcing, where sole sourcing is when there are no other reasonable alternatives (suppliers) and you then have to choose a specific supplier. According to Cox (2000), sole sourcing often leads to the relationship not being good and the supplier becoming too dominant in that the supplier is unique and important to the company.

3.3.2 Multisourcing

Multisourcing is according to Donaldson & O'Toole (2000) when a company uses several suppliers to manufacture a product, or alternatively switches between different suppliers to get the best price. Multisourcing can thus be linked to competitive purchasing where several suppliers compete on who should get the contract with the company to manufacture a certain product (Donaldson & O'Toole, 2000). The buyer has a dominant position in this context because the supplier can easily be replaced with another supplier, which lowers the supplier's negotiation power and increases the buyer's negotiation power. With a larger supplier base, however, the company becomes more sensitive to disturbances that may occur as a problem with a supplier can lead to the product not being manufactured (Hines, 1996). It is also more difficult to manage a larger supplier base as each relationship is unique and requires individual handling. Single sourcing is risky and having alternative suppliers in the network is according to Hines (1996) necessary.

3.3.3. Strategy for the supplier relationship

The types of relationships that are possible to achieve in a network depend on how large the company's supplier base is and Gadde & Håkansson (1998) mention the advantages and disadvantages of multi- and single sourcing. Depending on the type of relationship a company and a supplier have, as well as the size of the supplier base, it varies how the companies can act towards suppliers. Companies usually want to achieve win-win strategies in relationships with suppliers. According to Cox (2004b) this may sound obvious, but it often happens that the buyer's and the supplier's ideal situations go against each other and "rather something than nothing" is a more realistic way of working, while it is a win-win situation. despite the inequality.

Although they are individual connections, according to Gadde & Håkansson (1998) these are still connected to a larger network and must fit together and be able to be integrated with other parts of the network. This means that there are obvious dependencies between all actors from subcontractor to supplier and company. The scope for action is limited today because the companies' supply chains overlap (Hertz, 2006). Impact on the supplier from other parts of the overlap in the supply chain can lead to a relationship being destroyed. According to Hertz (2006), there are also other strategies for maintaining their position in the network, among other things, suppliers' goal may be to close markets from competitors to create isolation that allows them to charge higher prices (Cox, 2004b). For the buyer, it may instead be to pressure several suppliers to manufacture one and the same product and thus choose the supplier who delivers the best price (Hertz, 2006).

3.4 Lean Production

Lean Production is a philosophy that originated in Japan and is about managing resources. Lean is about working smart instead of working hard and at the same time achieving the

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highest possible profitability by “getting more by working less” (Huxley, 2015). The focus is on eliminating waste, both in production but also when it comes to staff. The aim is to reduce everything in production that does not create value for the customer (Huxley, 2015).

3.4.1 Just in Time (JIT)

According to Shah and Ward (2003), JIT is a tool within the Lean philosophy that aims to create an efficient system by manufacturing products in line with customer demand and with high quality. By using JIT, the company's performance increases, among other things, within delivery time, cost efficiency and quality consistency. JIT is about producing the right goods at the right time just when needed (just in time). A requirement to success with JIT, is that the availability for facilities and partners is high Shah and Ward (2003). By adapting production to demand, the company concerned can reduce the risk of overproduction, reduce the need for stock and reduce unnecessary transport. The company thus becomes customer order-driven Vazquez-Bustelo (2006).

The three main parts of Just-in-Time are as follows: - Continuous flow

- Time - Pull System

3.4.2 Single-Kanbansystem

Kanban is a concept in the production philosophy just-in-time (JIT) that signals the need for materials in an industry by informing about what is needed to be manufactured, how much to manufacture and when it must be manufactured Buhre & Persson (2007). The task of the kanban system is to control the material flow and production using the pull principle Buhre & Persson (2007).

The single-kanbansystem is an order point system that can best be used when a module is used as an input material when assembling a product. Then a single-cardkanbansystem can be used to control the number of articles received during assembly. This tool is most effective when handling items that are included as the component of a product (Zhang et al., 2015). That is, in semi-factory where components and raw materials are purchased from external suppliers and together form the content of the end product that is to be delivered to the end-customer. Single-kanban system is useful for controlling items where consumption is stable and predictable while having a low production volume and short lead times for stock replenishment. The production plant or central warehouse should be supplied by external suppliers through some type of administrative material sourcing system (Zhang et al., 2015).

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Figure 3: Pull-system

Figure 3 above shows a typical pull system. As the Kanban system is a pull-based system, the production and movement take place only on the initiative of the consuming unit in the material flow. It starts with an order that is sent to the supplier and then proceeds to production, assembled and the finished product is then delivered to the end customer (Zhang et al., 2015).

3.4.3 The 5S

The 5S method originally comes from Toyota and aims to create order in the workplace (in production). At the same time as 5S maintains and high quality in the workplace, the tool balances the environment and increases performance when it comes to health, safety and work environment. 5S is based on constant improvements where the human factor is a contributing factor to whether 5S implements correctly or encounters disturbances that prevent the tool from achieving its purpose (Khamis et al, 2009).

The 5 Japanese words that 5S stands for are according to (Khamis et al, 2009):

- Seiri (Sort): To differ material that is necessary from material that is not necessary. The material that is more necessary must be available for use and the material that is not as important should be removed or moved.

- Seiton (Systematize): All material must be in its own place and have its own place.

- Seiso (Clean): The workplace must be clean and always ready for use. Clean a little every day, general cleaning every week.

- Seiketsu (Standardize): Standardize by developing routines that can be used every day. - Shitsuke: Always look for continuous improvement and put it into practice.

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3.4.4 Value Stream Mapping (VSM)

According to Seth & Gupta (2005), Value Stream Mapping (VSM) is a tool used to map materials and information flows for elements in a value chain. Womack & Jones (1996) believe that VSM extends from raw materials to end customers and frees up the opportunity to identify value-creating and non-value-creating activities in the supply chain. According to Seth & Gupta (2005), VSM maps not only the material flow but also the information flow that signals and controls material flows. VSM is a lean-based tool used to step-by-step maintain different processes under the value chain Womack & Jones (1996).

To understand VSM from the customer's perspective, you should work your way up from the customer's nearest point and step by step identify the processes that create value for the customer. According to Tapping & Shuker (2003), the different steps are defined as follows:

1. First you should see what the external or internal customer and suppliers have for requirements per month and then draw these up.

2. The next step is to define the basic processes by drawing them from basic in the VSM. 3. The time: Document all times during the process. Days and hours, it takes for the components that go from station to station in manufacturing and the time between the station.

4. The entire information flow that intersects in the value stream have to be drawn and defined.

5. When all parts and processes are in place, it is important to analyze the entire value stream and review what can be done better and / or which parts of the process can be removed and / or changed to save costs, time and resources.

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4. Empirical Findings

4.1 Company Presentation

ABB AB is a leading global technology company that drives the transformation of society and industry to achieve a more production and sustainable future. ABB takes technology to new heights by creating technical solutions in the form of a combination of software and products in electrification, robotics and automation. This work has been carried out at ABB AB, Process Industries, which works with mining automation. ABB, AB Process Industries develops several different robot solutions, but the focus in this work has been on Robot Charger, which is one of the robot systems that is still under development and has been since 2013 (see figure 4).

Figure 4: Robot Charger

4.2 Current situation & Observations

Since Robot Charger is still a prototype under development that will soon be manufactured, a literature study was interesting. The company wanted help with applying literature to Robot Charger in the form of analyzing the value chain, identifying challenges with external suppliers and achieving cost-effective solutions when the modules are to be assembled and delivered to the customer. It has not yet been determined who will assemble the modules that will be purchased from different suppliers. It has not yet been determined where these modules will be mounted and how they will be transported to the customer either. A business plan is therefore under development where the company work with these issues to be able to integrate all processes with each other in such a cost-effective and flexible way as possible and meet the customer's needs. Customers are located in Europe, South America (Chile) and Australia.

From the interview done at the company, the global production manager means that the company want first and foremost define the production process where they must have an idea of how they want to work in the future. Therefore, they have to find and develop the

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process first, where it starts from the customer requirements. The production process is part of the business plan that the global production manager in the company are working on right now. He works on trying to define it in order to then be able to optimize it based on customer requirements and depending on whether the product is to be sold globally or within Sweden. If, for example, the company sell the robot globally, they may use local sales offices (engineering companies), who may then resell the product. Then they become the intermediary between the company and the end customer. This will lead to the sales channel taking place between that intermediary (local seller) and the end customer, and the company will become suppliers.

So far, the company have not had to adapt to competitors. The product is unique in comparison with competitors, but there are cases where other actors work to solve the same problem, but with a different method, such as hydraulic solutions. However, there can always be someone with, for example, a better vision camera or similar in the future and compete with us.

4.2.1 Cooperation with Customers.

According to the global production manager, the company constantly work close to the customer to share expertise and develop the product in a way where all parties are satisfied. They start from the feedback received from the customers and update the product based on that.

The most important aspect for the company that the robot system should be as simple and easy as possible to manufacture. They constantly try to build on the standards products that already exist to be able to adapt to the manufacturer and also the customer requirements in the future. The head of the robot must, for example, be able to be replaced at the customer's request. By developing the product in as simple a way as possible frees up space to be able to take help from many actors (subcontractors) in the market who can manufacture the product. Other discoveries that are made come from tests in the laboratory, where in practice it is easier to detect deficiencies or any errors that can be remedied or changed.

4.3 ABB End-2-End Process: Robot Charger 4.3.1 Robot Charger

The project with Robot Charger began in 2013 as a pre-study and has since been developed stage by stage. The first test done in the laboratory was in 2016 and were then tested in a mine for the first time in 2019. The next goal is to ensure that all functions are in place and work in operation.

The Robot Charger System contains many mechanical parts, but an overview of the modules of the Robot system and the function of each module is shown in the table below (see figure 5):

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Controlle r

Magazine Vision Primer box and assemblin g Head ABB standard industrial robot The Cassette Control the system Self-scanning of detonator ID Used for pre-scan and hole detection Feeder of primer Guide of emulsion hose into the hole

Foundry robot, IP class 67 Keep control of the signal tube Position itself Can contain up to 90 detonators with unique ID Self-learning hole detection Gripper for assembling of primer and detonator Today hose feeding at the header Robot controller as process brain Assemble d with detonato r and signal tube Receive work order Pre-loaded before enter the face Sealed protection box Insertion into the hose Carrier of camera and cassette Can be reused Report/No tify progress Each detonator id is read to high quality checks Self-learning algorithm Each detonator is assembled to a primer, one by one Force feedback control Can be prepared at factory Predict progress Is controlled by the robot controller Integrated into robot controller The assembled detonator and primer are pushed into the emulsion hose

Has its own rotating axis 3D printed by Digital Mechanic s Report deviation Integration node the explosive suppliers Notify interrupti on Keep track on consumab les

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Figure 5: Robot Chargers containing modules

4.3.2 Product Development

The purpose of Robot Charger is to increase safety in the mines through automation. Through this automation, people are removed from the unsafe environment in mines.

There is a great risk of accidents with rock falls in mines, so the goal with this automation has been to remove people from the area in the mine that are not rock-reinforced. The operator should instead be able to stand on a rock-reinforced area 5 meters away from the mine wall and check the Robot Charger. By doing a field study and dividing the work process into 12 tasks, each step could be automated separately:

1. Pre-scan face for positioning 2. Scan for hole detection

3. Pick up cassette with detonator/ signal tube 4. Prepare primer

5. Assemble detonator and primer

6. Insert the package at the end of the hose 7. Find right hole and insert the hose 8. Fill the hole with emulsion

9. Extract full length of signal tube from cassette 10. Drop the cassette for recycling

11. Next hole

12. Prepare for transport

4.3.3 Product Design (RND)

The whole idea of Robot Charger started as a 2D sketch which is then developed into a 3D sketch together with an external company. Via CAD the group at ABB AB, Process Industries has worked with the design from the ground, to make it as efficient as possible to get in all parts that Robot Charger contains.

4.3.4 Supply Chain Management

"Planning Unit" (see figure 6) is equivalent to ABB AB, Process Industries which should have full control over the factory that assembles the various modules that Robot Charger contains. If the company chooses to implement single-kanbansystem in the factory, the communication process between purchasing and the suppliers will be automated (see the literature).

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If ABB AB chooses the traditional purchasing method, the materials and modules will probably be purchased via the purchasing department at ABB. There they will order the modules needed based on customer requirements and demand. The modules are then delivered to the company's semi-factory or buyer where it will be assembled and delivered to customer.

4.3.5 Manufacturing

It is not yet clear how the assembly of all modules that will be provided by suppliers will take place. It has been discussed whether the assembly should be done by an external company instead. Much is aimed at a company abroad, for example in South America, being able to take care of the assembly of the modules and then deliver it to the end customer. The focus for the company has been on developing the prototype and step by step trying to get as close to the finished product as possible. It has also been discussed whether the company should use its own existing factories or open its own factory for this assembly.

4.3.6 Customer

As this report assumes that the manufacture of Robot Charger takes place in Sweden, it leads to delivery to the customer will take place from Sweden as a starting point. Transport to Chile, Australia, Canada and countries within Europe (except Sweden) will most likely take place via intermodal transport. Intermodal transport is a combination of several different modes of transport. Transport from the starting point can be delivered by truck, which then delivers the Robot Charger to a ship which then delivers it to the desired country. In that country, the Robot Charger is then loaded onto a truck and driven to the end customer. If the customer is located in Sweden, it may be optimal to only use a truck to deliver the Robot Charger from the warehouse to the customer.

If the customer is a local sales office (see interview with global production manager), the transport of Robot Charger will probably only take place by truck in Sweden. This is because the local sales offices itself will be responsible for delivering the robot charger to the end customer. This means that the suppliers who will supply the modules to ABB become subcontractors, ABB themselves become suppliers and the local sale offices become the reseller who delivers robot chargers to the end customer. The advantage of using local sales offices is that the responsibility for the global delivery to the end customer is transferred to the local sales offices that must handle that part.

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5. Analysis

This chapter is divided into two parts. The first part is linked to RQ1: Manufacturing: To answer the research question, this part of the analysis is divided as follows: Economic Factors and Self-owned semi-factory with elements of Lean-Production. The second part of the analysis is linked to RQ2 and can be found under external supplier relations.

The analysis is based on the data collected from the literature and empirical data collection at the company. Similarities and differences between the company and the literature and a connection between these may be of interest to identify. The results of this chapter can facilitate decision-making in the company in the future.

5.1 Manufacturing

This part of analysis is linked to Manufacturing and is divided as follows: Economic Factors and Self-owned semi-factory with elements of Lean-Production.

5.1.1 Economic Factors

The analysis of empirical findings and literature identifies a list of economic factors that can play a major role in decision-making of the managers. The important economic factors are highlighted in the form of guidelines and summarized in figure 8 below.

First and foremost, an analysis of the current situation regarding the economy must be made with, for example, a survey of what activities are required to perform a certain operation and what they cost. The survey can be started by identifying what costs exist for a particular activity or by trying to identify what costs will arise for carrying out the activity. In this way, you analyze costs and can discover which costs are unnecessarily high or can change when it comes to, for example material selection or processes.

The choice of supplier plays a major role when there is to be a change in the process. It must be examined whether the change in the process is financially sustainable by defining the costs of the changed work at the existing supplier. If the existing supplier does not meet the quality requirements, does not have the required competence or if the possibilities for negotiation are limited, an alternative supplier needs to be considered. A thorough investigation also needs to be done with the alternative supplier to see if the collaboration is financially sustainable.

If the company does not think that outsourcing is most suitable, they can instead take over the activity in their own premises (backsourcing), but even then, count on the costs of manufacturing the product themselves compared to if someone else does it. If the company chooses to manufacture the product in its own premises, all costs from cleaning and personnel to equipment, machines and tools should be considered in the calculation.

The different alternatives can be compared with each other by making a MoB calculation that shows which solution creates the highest economic profitability. The calculation will show how much return the investment made results in, when the investment is expected to be repaid (+ - 0) and when the income begins to be generated.

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Figure 8: Economic Factors

5.1.2 Self-owned semi-factory with elements of Lean-Production

Kanban is an effective tool used to reduce waste and streamline production lines at the company’s semi-factory, but Rahman (2011) is critical and believes that Kanban cannot always be implemented. If the demand is unstable, it can be a big problem when implementing the Lean-tool in the start-up phase. In this case, the demand will be stable, which creates good conditions for the company to be able to implement Kanban. The process first needs to be identified at the company to effectively implement Kanban and get the best possible results. The Lean tool Just in Time (JIT) marks the achievement of this as the tools together lead to results such as productivity, efficiency, reduced costs and increased quality (Ward, 2003). If ABB AB opens its own semi-factory for assembling the modules, these tools should be considered for increased efficiency. According to the Value Stream Map (VSM) illustrated (see empirical findings), we see that stocks created between each station in the assembly line require space for inventory. Chan et al., (2010) believe that JIT is a production philosophy that reduces the stock level between the processes in production and emphasizes the importance of getting the right material, at the right time, in the right place.

To achieve safety, quality in the production and order in the workplace, 5S can be implemented in the semi-factory. (Khamis et al, 2009) believes that 5S increases efficiency when it comes to health and work environments where the human factor plays a major role in the facility. Sorting the important material from the unimportant material, systematizing the material, cleaning every day, standardizing the work with routines and always looking for opportunities for improvement, he believes, are the most important factors in achieving what 5S stands for. The staff on the semi-factory will play a major role

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in the success of 5S. This means that a great deal of responsibility is assigned personally on site in order to get the best possible result from this Lean tool.

This part of the analysis is linked to RQ2: Supplier relations. To answer the research question, this part of the analysis is divided as follows: Develop a collaboration with the current supplier, Develop a collaboration with an alternative supplier, Multisourcing with elements of Porter's Five Forces and the Interaction Model and Process factors.

5.2 Supplier relations

This part of the analysis is linked to Supplier relations and is divided as follows: Develop a collaboration with the current supplier, Develop a collaboration with an alternative supplier, Multisourcing with elements of Porter's Five Forces and the Interaction Model and Process factors.

5.2.1 Develop a collaboration with current supplier

Robot Charger contains several different modules that need to be manufactured by several different suppliers completely independent of each other. A combination of single and multisourcing depending on which module is to be manufactured may be of interest to the company. Donaldson & O'Toole (2000) believe that single sourcing often leads to a stronger relationship with the supplier where companies and suppliers share expertise and sometimes even resources with each other to develop a product together. Cox (2000) agrees but believes that there is a risk that the supplier becomes too dominant because it is unique to the company and disruptions to production can arise if everything depends on a supplier. The company has already enlisted the help of suppliers to jointly develop the cassettes. It has been discussed whether the cassettes should contain the explosive even before they are delivered to the company or whether they should come empty and the company itself installs the explosives. This is a typical example of a relationship between supplier and company where you share expertise and develop parts of the product together before the product is to be launched on the market for real. (Chicksand, 2015) believes that the benefits of partnerships such as these lead to a reduction in uncertainty, management of complexity and costs, but also mentions that it is of great importance that both parties agree on what should apply.

5.2.2 Multisourcing with elements of Porters Five Forces and the Interaction Model

The overview of the entire supply chain makes it obvious to adopt the approach multisourcing. Multisourcing is according to (Hines, 1996) when a company uses several suppliers to manufacture a product, which is the case for Robot Charger. Ellegaard et al., (2003) believe that in order to be able to lead a network of suppliers, each supplier's relationship should be handled separately, but that one should also think about consequences that may arise for the other players in the network if something goes wrong with a supplier. The company should handle its supplier relationships with exactly the same caution with a consistent mindset. Cox (2004a) also believes that each supplier's relationship is unique but also plays a larger role in a larger network of other actors.

There is no doubt that the production of Robot Charger will lead to the formation of a complex network of several actors. With the help of Porter's Five Forces, the company can coordinate

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the complex network of activities of which they themselves are a part of to achieve competitive advantages (Porter, 1985). Cox (1999) agrees but believes that two-sided dependence is important. He writes that there are many advantages to both actors being dependent on each other and that it can even, in some cases, lead to "join Investment" where you invest together. The Interactions model contradicts this, as the supplier has no control in this model. The relationship between supplier and company is governed entirely by the company that is to be dominant and Ellegaard et al., (2003) believe that the individual actors can only control and influence their own activities on their own factory.

Both the Porter's Five Forces model and the Interactions model may be of interest to use in the manufacture of Robot Charger. Depending on which module is to be manufactured, the relationship can be adapted by the company. If it is a complex module that requires a high level of communication and two-sided competence, the five forces model can be good to use. If it is a module that is not as complex, for example, the steel plate in Robot Charger, then the company can use "Competitive Purchasing". Spekman et al., (1998) believe that with Competitive Purchasing, the company sends out an order request to several different suppliers that they consider appropriate. These suppliers receive the order and then have to compete with each other on who will get the contract with the company. The suppliers' negotiation power mentioned in Porter's Five Forces then becomes weak and they can easily be replaced if they do not agree to manufacture the desired product for the price the company wants. According to the interview conducted by the company, the steel plate on which all modules are to be mounted on can be manufactured by virtually any workshop. This gives the company a perfect position to push down the price of the product with the help of competitive purchasing.

5.2.3 Process factors

Figure 9 below shows the factors that are key factors at the supplier and that are linked to the process for the activity. A survey should be made with suppliers to define process descriptions of activities and to be able to analyze the current situation of bottlenecks in the process. As the company has not yet fully identified which suppliers are suitable, this figure can be used to get an element of possible factors that may affect the collaboration in the future. A job description and safety analysis should be done to increase understanding of how the supplier works and push forward the improvement work. By starting from these points, you can identify whether the supplier possesses the competence required or whether you need to review other suppliers and compare them. In this way, the company can review its supply chain and see if there is a need to expand the network. By mapping the activities in the process, it is also easier to plan what resources are needed in the semi-factory that may be built. Everything from staff and machines to tools and equipment necessary to perform the work.

Today, there are already ABB standard products to be used as modules for Robot Charger. This means that the company, just as the figure mentions, makes an internal survey (in-house) to identify suppliers that can be useful for the process. In-house competencies that can be useful for the manufacture of the product can also be more easily identified. It is also necessary to

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finally make a risk analysis to identify risks that may arise during the process and adjust the safety accordingly.

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6. Results & Recommendations

6.1 Manufacturing

The purpose of the recommendations in this chapter is to facilitate the decision-making of the company in the future with literature as a basis. The recommendations are based on literature that has been adapted based on the empirical data collected by the company. After the value stream map and the hypothetical production line that has been created, the application of literature for each module is recommended below.

6.1.1 Value Stream Mapp

In Figure 6 below, a Value Stream Mapping (VSM) has been developed, however, the cycle times or process times are not specified yet. ABB AB, Process Industries is the Planning Unit in this figure. This VSM assumes that ABB AB will open a semi-factory themselves to assemble the modules purchased from suppliers, package the finished product and deliver the Robot Charger to the end customer. If a semi-factory is already available with space for a new line, this VSM can be used as a template to among other things:

- Calculate cycle times - Calculate lead times

- Illustrate the flow and relationship between work processes - Identify value-adding and non-value-adding activities.

Development of efficient value chain after product development

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