Basic types of Productive Systems

The two-by-two matrix of basics types of productive systems provides managers with a simple but powerful understanding of the range of systems available and their appropriate application. Whether the market conditions support a process focused or product focused system and a to-order or to-stock system can be of the greatest importance in the ultimate competitiveness of a company. Real systems are often a combination of basic types because of different sizes and styles of the same product or because related product lines can gain economies by aggregating production requirements for common components.

The positioning of the productive system in relation to markets is of the greatest importance to managers. This positioning should be an integral part of the overall corporate strategy and should include the decision of whether to produce to stock or to order. The concept of the product life cycle provides a rationale for the growth, development, maturation, and decline of products. Managers need to match the appropriate productive system type to their position on the product life cycle. This does not mean that there is a rigid one to one relationship between one’s position on the product life cycle curve and the exact kind of productive system that is appropriate. Managers may choose to emphasize quality and diversity of multiple products as a way of gaining a competitive advantage. Alternately, a manager in the same basic situation might choose to compete on price and availability with a limited line. The success of enterprises that choose different bases for competing, using their productive system as a weapon, gives evidence that there is no right answer to each situation.

Investment in improved process technology, either by direct purchase or through allocations to research and development, can reduce future costs and improve quality. With dramatic breakthroughs in process technology, a firm could even lower prices, which could provide a very effective competitive weapon. A danger of the effects of highly integrated automated systems is the loss of flexibility that results from specialization. But the new technologies of numerically controlled machines, CAD/ CAM, and flexible manufacturing systems tend to counter balance this disadvantage of older automated systems.

Finally, organizational structure should be chosen to give support to the productive system design. In general, organizational structure follows the basic design of the system – if the productive system is designed for process focus, then the organization should be process and vice versa.

Differences between Process and Product focused:

Profit or cost responsibility; where located Size of corporate staff Major functions of corporate staff

Process Focus:

1) Central organization
2) Relatively large
a) Coordination with marketing
b) Facilities decisions
c) Personnel policies
d) Purchasing
e) Logistics, inventory management
f) Coordination of production schedules
g) Make versus buy, vertical integration decisions
h) Recruit future plant managers
i) Review plant performance

Product Process:

1) Product group
2) Relatively small

a) Review of capital appropriation requests
b) Communicate corporate changes and requests
c) Act as clearing house for personnel information, management recruiting, purchasing, used equipment, management development programs.
d) Evaluate and reward plant managers
e) Select plant managers and manage career paths – possibly across product group lines.

Major responsibilities of plant organizations:

Process Focus

a) Use materials and facilities efficiently
b) Recruit production, clerical, and lower management workers
c) Training and development and future department and plant managers
d) Respond to special requests from marketing, within limited ranges.

Product Focus:

a) Coordination with marketing
b) Facilities decisions (subject to marketing)
c) Purchasing and logistics
d) Production scheduling and inventory control
e) Make versus buy
f) Recruit management.