Link Manufacturing Process and Product Life Cycles

133 middleman manufacturing serve and carrefour life daily rounds Focusing on the influence gives a new balance to out word of mouth Robert H. convert and Steven C. wheel horse Although the harvest- crustal plate life regular recurrence concept whitethorn pass on value for managers, its vehemence on merchandising stool organize it inadequate for strategical planners. These authors point out that using a knead life hertz can help a high society choose among its mingled manufacturing and selling options. utilize the concept of a w atomic number 18- member intercellular substance, they show how a play alongs status reflects its weaknesses and strengths, and they argue the implications for incorporated out trace.Mr. Hayes is professor of business administration at the Harvard bound of credit School. He is currently serving as dexterity chairman of and belief at Harvards Senior Managers Program in Vevcy, Switzerland. iodin of his previous obliges in HBR is How Should You Organize Manufacturing? (coauthor, Roger W. Schmenner, JanuaryFchruary 1978). Mr. Wheelwright wing is associate professor of business administration at the Harvard Business School. He is currently teaching in the MBA program and is faculty chairman of Harvards executive program on Manufacturing in Corporate Strategy. one(a) of his previous HBR articles is Corporate Forecasting Promise and Reality, coauthor, Darral G. Clarke, nary(prenominal)emberDecember 1976). The regularity of the festering cyeles of life- meter organisms has always fascinated thoughtful observers and has invited a variety of attempts to apply the self aforementioned(prenominal)(prenominal) principlesof a predict repugnnt sequence of rapid growth followed by maturation, dec row, and death-to companies and selected industries. nonpargonil such concept, k forthwithn as the crossroad life hertz/ has been analyze in a wide range of governing bodyal benttings. However, there ar suf ficient opposing theories to raise the doubts of people desire N. K. Dhalla and S. Yuspeh, who argued in these same pages a few years ago that businessmen should forget the crop life rack concept. Irrespective of whether the crop life regular recurrence formula is a general rule or holds completely for specific cases, it does come by means of a useful and provocative framework for thinking about the growth and s very muchment of a new product, a long-familiarity, or an entire constancy. One of the major shortcomings of this approach, however, is that it concentrates on the grocerying implieations of the life musical rhythm pattern.In so doing, it implies that otherwise aspects of the business and industry environment move in plan with the market life cycle. plot of ground such a take hold of whitethorn help one to think back on the kinds of ehanges that occur in contrary industries, an case-by-case companion will often find it as well as simplistic for use i n its strategic readying. In fact, the concept may even be mis carrying in strategic planning. In this article we suggest that separating the product life cycle concept from a link but distinct phenomenon that we will call the process life I TJie Product Life Cycle and InternationaTrade. Louis T. Wells, r. , ed. ICambridge, Mass. HarvaiiJ University Press, 1D71I, im example. proviJcs evidence from a number of industries that argues for wide application of this concept, 2. N. K. Dhalla and S. Yuspirh, Forget the Priidutt Life Cycle CnniepU HBR I3nuary-February 197(1, p. 101. 134 Harvard Business suss out January-February 1979 cycle facilitates the understanding of the strategic options available to a company, particularly with regard to its manufacturing function. The product-process intercellular substanceThe process life cycle has heen attracting increasing attention from husiness managers and researchers over the aside some(prenominal) years. Just as a product and market carry out through a serial of major percentage points, so does the intersection process used in the manufacture of that product. The process evolution typically hegins with a fluid processone that is highly flexible, hut not truly be in effect(p)and proceeds toward increasing standardization, mechanization, and automation. This evolution culminates in a system of rulesic process that is very efficient hut much much(prenominal)(prenominal) heavy(p) intensive, nterrelated, and hence less flexible than the original fluid process. utilise a product-process matrix, confront I suggests one way in which the interaction of both the product and the process life cycle stages can he delineated. The rows of this matrix represent the major stages through whieh a business process draws to pass in going from the fluid form in the sort row to the systemic form in the bottom row. The columns represent the product life cycle phases, going from the great variety associated with s tartup on the left-hand side to standardized commodity products on the right wing(a) side. coloured position A company or a husiness unit at heart a diversified company) can be characterized as occupying a particular neighborhood in the matrix, determined by the stage of the product life cycle and its choice of drudgery process for that product. Some simple examples may brighten this. Typical of a company positioned in the speeding left-hand reaching is a commercial printer. In such a company, each billet is unique and a jumbled decrease or job support process is comm nevertheless selected as being most effective in bear oning those product requirements.In such a job shop, jobs pay back in various forms and require different projects, and thus the equipment tends to be comparatively general purpose. Also, that equipment is seldom used at ioo% capacity, the workers typically have a bun in the oven a wide range of exertion skills, and each joh takes much longer to go t hrough the go under than the lahor hours required by that job. Further down the byzant in this matrix, the manufacturer of heavy equipment usually chooses a production organize characterized as a disconnected line flow process.Although the company may make a numher of products (a customer may even be able to order a somewhat customized unit), economies of scale in manufacturing usually lead such companies to offer several hasic expressive stylels with a variety of options. This enables manufacturing to move from a job shop to a flow pattern in which batches of a accustomed model proceed irregularly through a series of work stations, or possihly even a low mountain hookup line. Even come on down the oblique, for a product like automobiles or major home appliances, a company will generally choose to ake only a few models and use a relatively mechanized and connected production process, such as a moving assembly line. such(prenominal) a process matches the product life cycle requirements that the automobile companies must(prenominal) fill up with the economies availahle from a standardized and automated process. Finally, down in the far right-hand comer of the matrix, one would find refinery trading trading exertions, such as oil or sugar processing, where the product is a commodity and the process is continuous.Although such operations are highly narrow, inflexible, and keen intensive, their disadvantages are to a greater extent than off even up by the low variable costs arising from a high volume termination through a standardized process. In Exhibit 7, devil corners in the matrix are void of industries or individual companies. The upper right-hand comer eharacterizes a commodity product micturated by a job-shop process that is simply not economical. Thus there are no companies or industries located in that sector. Similarly, the land left-hand corner represents a one-of-a-kind product that is made by continuous or very specific processes.s uch(prenominal) processes are simply too inflexible for such unique product requirements. Off the slanted The examples cited thus far have been the to a greater extent familiar diagonal cases, in which a certain kind of product organise is matehed with its natural process body structure. But a company may try out a position 3. For example, William ), Abernathy and Philip L. Townscnd, TechnoloRy, Pioductivity, and bring Changes, in Tachnaloicdl Forfcoitinj iind Social Cbange, Volume VII, No. 4, 1975, p. 79) Abcmathy and lames Ulierback, DyQ. mic Model of Process and Product Innovation, Omega, Volume HI, No. 6, 1975, p. 6i9i Abernathy and Uuerback, Innovation and the becomeing of Technology in the Firm, Harvard Business School Working P. iper HBS 7S-fiR, Revised unc 197. Process life cycles 135 Exhibit I Matching major stages of product and process life cycles Product structure Product life cycle stage I Low volume-low standardization, one of a kind fivefold products low volume Few major products higher volume IV High volume-high standardization. commodity productsProcess structure Process life cycle stage jumbled flow (job shop) Commercial printer Disconnected line Mow (batch) Heavy equipment Connected line flow (assembly line) Automobile assembly IV Continuous flow off the diagonal instead of right on it, to its warlike advantage. Rolls-Royce Ltd. still makes a limited product line of motor cars using a process that is more like a job shop than an assembly line. A company that allows itself to drift from the diagonal without understanding the apt(predicate) implications of such a shift is asking for trouhle.This is ostensibly the case with several companies in the factory housing industry that allowed their manufacturing operations to drive too capital intensive and too de- 136 Harvard Business revaluation January-February 1979 pendent on stable, high-volume production in the archeozoic 1970s. As one tycoon expect, when a company moves too far a way from the diagonal, it hecomes increasingly conglomerate from its competitors. This may or may not, depending on its success in achieving taper and exploiting the advantages of its niche, make it more vulnerable to attack.Coordinating marketing and manufacturing may become more difficult as the two areas confront increasingly different opportunities and pressures. Not infrequently, companies find that both inadvertently or by apprised choice they are at positions on the matrix very unhomogeneous from those of their competitors and must consider drastic remedial action. Most gloomy companies that immortalise a mature industry start off this way, of course, which grants one invoice of both the strengths and the weaknesses of their situation.One example of a companys matching its movements on these two proportions with changes in its industry is that of Zenith Radio Corporation in the mid-mid-sixties. Zenith had generally followed a schema of maintaining a high degree of flexibility in its manufacturing facilities for polish television receivers. We would characterize this process structure at that time as being stage 2. When planning additional capacity for color TV manufacturing in 1966 during the height of the rapid growth in the market), however.Zenith chose to expand production capacity in a way that delineated a clear move down the process dimension, toward the matrix diagonal, by consolidating color TV assembly in two large plants. One of these was in a relatively low-cost labor area in the United States. While Zenith continued to have facilities that were more flexible than those of other companies in the industry, this finale reflected corporate troubles assessment of the need to stay within range of the industry on tbe process dimension so that its excellent marketing strategy would not be constrained by inefficient manufacturing.It is interesting that heptad years later Zenith made a similar decision to arrest all of its production of color television chasses in the United States, quite a than lose the flexibility and incur the costs of moving production to the faraway East. This decision, in conjunction with others made in the past five years, is now being called into question. Using our terminology. Zenith again finds itself too far above the diagonal, in comparison with its large, primarily Japanese, competitors, most of whom have mechanized their production processes, positioned them in low-wage countries, and embarked on other costreduction programs.Incorporating this additional dimension into strategic planning encourages more creative thinking about formational fencence and hawkish advantage. It too can lead to more informed predictions about the changes that are likely to occur in a particular industry and to consideration of the strategies that power be followed in responding to such charges. Finally, it provides a natural way to include manufacturing managers in the planning process so that t hey can relate their opportunities and decisions more effectively with marketing strategy and corporate goals.The experience of the late 1960s and early 1970s suggests that major warring advantages can accrue to companies that are able to integrate their manufacturing and marketing organization with a common strategy. Using the concept We will explore three issues that follow from the product-process life cycle 1) the concept of typical competence, 2) the forethought implications of selecting a particular product-process combination, considering the competition, and 3) the organizing of different operate units so that they can designate on separate portions of the total manufacturing task while still maintaining overall coordination.Distinctive competence Most companies like to think of themselves as being particularly good relative to their competitors in certain areas, and they try to nullify competition in others. Their objective is to prophylactic this distinctive compet ence against outside attacks or internal aimlessncss and to exploit it where possible. From time to time, unfortunately, management becomes preoccupied with marketing concerns and loses sight of the value of manufacturing abilities. When this happens, it thinks about strategy in terms only of the product and market dimension within a product life cycle context.In effect, management concentrates resources and planning efforts on a relatively narrow column of the matrix shown in Exhibit 1 on page r35. 4. See ManufacturingMissing Link in Corporate Stiatcgy, by Wickham Skinner, HBR May-June 1969, p. i6. Process life cycles 137 Exhibit II Expanded product-process matrix Product structure Product lite cycle stage III Low volume low standardization, one of a kind Process structure Process life cycle stage Multiple products low volume Few major products higher volume IVHigh volume-fiigh standardization. commodity products Key management tasks Flexibilityquality Fast reaction Loading plan t, estimating capacity Estimating costs and delivery times Breaking bottlenecks ensnare tracing and expediting Systematizing diverse elements Developing standards and methods, improvement Balancing process stages Managing large, specialized, and Byzantine operations Meeling material requirements Running equipment at peak efficiency clock expansion and technological change Raising required capitalJumbled flow (lobshop) Disconnected line flow (batch) Connected line flow (assembly line) IV Continuous flow Hone Dependabilitycost Flexibility-quality Dependability-cosi dominant hawkish mode Custom instauration General purpose High margins Custom design Ouality control Service High margins Standardized design Volume manufacturing ruined goods inventory Distribution Backup suppliers Vertical integration Long runs specialize equipment and processes Economies of scale Standardized materialThe advantage of the two-dimensional point of view is that it go fors a company to be more precise about what its distinctive competence really is and to concentrate its attentions on a restricted stipulate of process decisions and alternatives, as well as a re- stricted set of marketing alternatives. Real boil down is maintained only when the emphasis is on a single patch in the matrixa process focus as well as a product or market focus. As suggested by Wickham Skinner, narrowing the focus of the business units 138 Harvard Business Review January-February 1979 ctivities and the supporting manufacturing plants activities may greatly increase the chance of success for the organization/ Thinking about both process and product dimensions can change the way a company defines its product. For example, we recently explored the case of a specialized manufacturer of printed circuit boards. Managements initial assessment of its position on the m. atrix was that it was producing a lowvolume, one-of-a-kind product using a highly connected assembly line process . (This would place it in the lower left comer of the matrix. On but reflection, however, management decided that while the company specialized in small production batches, the product it really was offering was a design efficiency for special purpose circuit boards. In a sense, then, it was mass producing designs instead than boards. Hence, the company was not far off the diagonal after all. This acquaintance of the companys distinctive competence was helpful to management as it considered different projects and decisions, only some of which were supportive of the companys actual position on the matrix. Effects of positionAs a company undertakes different combinations of product and process, management problems change. It is the interaction amidst these two that determines which tasks will be critical for a given company or industry. Along the process structure dimension, for example, the samara militant advantage of a jumbled flow operation is its flexibility to both product and volume changes. As one moves toward more standardized processes, the competitive emphasis generally shifts from flexibility and quality (measured in terms of product specialization) to reliability, predictability, and cost.A similar sequence of competitive emphases occurs as a company moves along the product structure dimension. These movements in priorities are illustrated in Exhibit 11 For a given product structure, a company whose competitive emphasis is on quality or new product development would choose a much more flexible production operation than would a competitor who has the same product structure but who follows a cost-minimizing strategy. Alternatively, a company that chooses a given process structure reinforces the characteristics of that structure by adopting the corresponding product structure.The former approach 5. The Focused Factory, HBR May-June 1974, p. 113. 6. Robert H. Hayes and Roger W. Schmenner, How Should You Organize Manufacturing? HBR January-February iy78, p. 105. positions the company above the diagonal, while the latter positions it somewhere along it. A companys location on the matrix should take into account its tralatitious orientation. Many companies tend to be relatively aggressive along the dimensionproduct or process-where they feel most competent and take the other dimension as given by the industry and environment.For example, a marketing-oriented company seeking to be responsive to the unavoidably of a given market is more likely to emphasize flexibility and quality than tbe manufacturing-oriented company that seeks to mold the market to its cost or process leadership. An example of these two competitive approaches in the electric motor industry is provided by the contrast among Reliance Electric and Emerson Electric. Reliance, on the one hand, has apparently chosen production processes that place it above the diagonal for a given product and market, and the company emphasizes product customizing and performance. Emerson, on the other hand, tends to position itself below the diagonal and emphasizes cost reduction. As a result of this difference in emphasis, the majority of Reliances products are in the upper left quadrant, while Emersons products tend to be in the lower right quadrant. Even where the two companies product lines overlap. Reliance is likely to use a more fluid process for that product, while Emerson is more likely to use a standardized process. Eaeh company has sought to develop a set of competitive skills in manufacturing and marketing that will make it more effective within its selected quadrants.Concentrating on the upper left versus the lower right quadrant has many additional implications for a company. The management that chooses to compete primarily in the upper left has to decide when to drop or abandon a product or market, while for the management choosing to compete in the lower right a major decision is when to self-feeder the market. In the latter case, the compan y can watch the market develop and does not have as much need for flexibility as do companies that position themselves in the upper left, since product and market changes typically occur less frequently during the later phases of the product life cycle.such(prenominal) thinking about both product and process expertise is particularly useful in selecting the match of these two dimensions for a new product. Those familiar with the digital watch industry may recall that in the early 1970s Texas Instruments introduced a jewelry line digital watch. This product represented a matrix combination in the upper left-hand quadrant, as shown in Exhibit U. Unfortunately, this line Process life cycles 139 of watches was disappointing to Texas Instruments, in terms of both volume and profitability.Early in 1976, therefore, TI introduced a digital watch selling for $19. 95. With only one electronic mental faculty and a connected line flow production process, this watch represented a combination of product and process further down the diagonal and much more in keeping with TIs traditional strengths and emphases. Organizing operations If management considers the process structure dimension of organizational competence and strategy, it can usually focus its operating units much more effectively on their individual tasks.For example, many companies face the problem of how to organize production of patent part for their primary products. While increasing volume of the primary products may have caused the company to move down the diagonal, the follow-on demand for spare parts may require a combination of product and process structures more toward the upper left-hand corner of the matrix. There are many more items to be manufactured, each in smaller volume, and the appropriate process tends to be more flexible than may be the case for the primary product.To accomodate the specific requirements of spare parts production, a cohipany might develop a separate quickness for them or s imply separate their production within the same facility. in all probability the to the lowest degree appropriate approach is to leave such production undifferentiated from the production of the basic product, since this would require the plant to span too long a range of both product and process, making it less efficient and less effective for both categories of product. The choice of product and process structures will determine the kind of manufacturing problems that will be important for management.Some of the key tasks related to a particular process structure are indicated on the right side of Exhibit U. Recognizing the impact that the companys position on the matrix has on these important tasks will often suggest changes in various aspects of the policies and procedures the company uses in managing its manufacturing function, particularly in its manufacturing control system. Also, measures used to reminder and evaluate the companys manufacturing performance must reflect the matrix position selected if such measures are to be both useful and consistent with the corporate goals and strategy.Such a task-oriented analysis might help a company avoid the loss of control over manufacturing that often results when a standard set of control mechanisms is applied to all products and processes. It also suggests the need for different types of management skills and managers, depending on the companys major manufacturing tasks and dominant competitive modes. While a jolly narrow focus may be required for success in any single product market, companies that are large enough can and do) effectively produce multiple products in multiple markets.These are often in different stages of the product life cycle. However, for such an operation to be successful, a company must separate and organize its manufacturing facilities to best meet the needs of each product and then develop sales volumes that are large enough to make those manufacturing units competitive. An examp le of separating a companys total manufacturing talent into specialized units is provided by the Lynchburg Foundry, a wholly owned subsidiary of the Mead Corporation. This foundry has five plants in Virginia.As Exhibit U shows, these plants represent different positions on the matrix. One plant is a job shop, making largely one-of-akind products. Two plants use a decoupled batch process and make several major products. A fourth plant is a paced assembly line operation that makes only a few products, mainly for the automative market. The fifth plant is a highly automated pipe plant, making what is largely a commodity item. While the basic technology is somewhat different in each plant, there are many similarities.However, the production layout, the manufacturing processes, and the control systems are very different. This company chose to design its plants so that each would meet the needs of a specific segment of the market in the most competitive manner. Its success would suggest that this has been an effective way to match manufacturing capabilities with market demand. Companies that specialize their operating units according to the needs of specific, narrowly defined patches on the matrix will often encounter problems in integrating those units into a set up whole.A recent article suggested that a company can be most successful by organizing its manufacturing function just about either a product-market focus or a process focus. * That is, individual units will either manage themselves relatively autonomously, responding directly to the needs of the markets they serve, or they will be divided according to process stages (for example, fabrication, subassembly, and final assembly), all coordinated by a central staff. Companies in the major materials industriessteel companies and oil companies, for exampleprovide classic examples of process-organized manu- one hundred fortyHarvard Business Review January-February 1979 facturing organizations. Most companies that broaden the span of their process through vertical integration tend to adopt such an organzation, at least initially. Then again, companies that adopt a product- or market-oriented organization in manufacturing tend to have a strong market orientation and are opposed to accept the organizational rigidity and lengthened chemical reaction time that usually accompany centralized coordination. Most companies in the packaging industry provide examples of such product- and market-focused manufacturing organizations.Regional plants that serve geographical market areas are set up to reduce transportation costs and provide better response to market requirements. A number of companies that historically have organized themselves around products or markets have found that, as their products matured and as they have moved to become more vertically integrated, a conflict has arisen between their original productorganized manufacturing facilities and the needs of their process-oriented int ernal supply units.As the competitive emphasis has shifted toward cost, companies moving along the diagonal have tended to evolve from a product-oriented manufacturing organization to a process-oriented one. However, at some point, such companies often discover that their operations have hecome so complex with increased volume and increased stages of inhouse production that they defy centralized coordination and management must revert to a more product-oriented organization within a divisionalized structure. ct line with a manufacturing systema set of people, plants, equipment, technology, policies, and control proceduresthat will permit a relatively high degree of flexibility and a relatively low capital intensity? Or should it prefer a system that will permit lower cost production with a loss of some flexibility to change in products, production volumes, and equipment) and usually a higher degree of capital intensity? This choice will position the company above or below its compet itors along the vertical dimension of our matrix.There are, of course, several propellent aspects of corporate competitiveness where the concepts of matching the product life cycle with the process life cycle can be applied. In this article, however, we have dealt only with the more static aspects of selecting a position on the matrix. We will cover in a forthcoming article how a companys position on the product-process matrix might change over time and the traps that it can flag into if the implications of such moves are not carefully evaluated. Strategy implications We can now pull together a number of threads and summarize their implications for corporate strategy.Companies must make a series of interrelated marketing and manufacturing decisions. These choices must be continually reviewed and sometimes changed as the companys products and competitors evolve and mature. A company may choose a product or marketing strategy that gives it a broader or narrower product line than it s principal competitors. Such a choice positions it to the left or right of its competitors, along the horizontal dimension of our matrix. Having made this decision, the company has a further choice to make Should it produce this prod-