INTRODUCTION:

While there has been significant contribution of the services sector in the recent past, manufacturing sector will hold the key for the development of any economy. The prosperous nations of today owe their success to their wealth creating sector, of which manufacturing is a key factor. Yet, the manufacturing sector is facing a tough competition from the non-manufacturing sector. Industries are taking the marketing and other functional activities more seriously than the manufacturing function. With the changing consumer needs, the industry, all the time, looks at offering newer products with latest technology. Meeting the dynamic customer needs and the emergence of newer technologies will demand for devising superior overall-manufacturing capabilities.

The process industry has to address these issues and design a, somewhat, different operational strategies for competing, more so in the wake WTO’s prophecy in favour of intellectual property.

The competition is multifaceted. On one side it is from multinationals setting up manufacturing dates “new-technology” advantages and on the other, is competition from non-process industry where imports help counter cost and quality challenges. The process industry has to look to improve not only the manufacturing processes but also the entire chain of activities in the market place.

PROCESS INDUSTRY:

The process industry can be defined in simple terms, which “...processes bulk material to get finished products through physical and chemical processes with a high degree of instrumentation, control and automation”.

The process industry is capital intensive. The average investment per employee is as high as three times that of the non-process industry. The average employee output ratio is also high. It is twice that of output per employee in the non-process industry. The average net value added per emoluments in the non-process industry. While the net value added per capital employed, in the process industry, is almost half as that of non-process sector.

Table-1: A comparison of process and non-process industry based on some important parameters is given in.

Parameter	Process	Non-Process
Investment/Employee Rs. (x10^6)	3	1
Output/Employee /Rs. (x10^6)	2	1
Output/Capital Employed	0.75	1
Net Value Added/Emoluments	2.2	1
Net Value Added/Capital Employed	0.55	1

Source: Public domain

The typical sub sectors in the process industry are given below:

· Ferrous and Non-Ferrous Metal Production (Steel, Aluminium, Copper, etc.)

· Refining and Petrochemicals

· Fertilizers

· Cement, etc.

In the process industry, the manufacturing is characterized by input of materials of very high volume of very high volume or weight and the output is generally or low to very low volumes or weight for example, steel, air separation, fertilizers, etc. But this is not so in the case of petrochemicals, refinery, etc.

STRATEGIC OPTIONS:

In an environment of stiff competition, to remain in business, has become a priority over growth. To achieve growth, one has to operate with efficiency and effectiveness. One needs to understand the market changes and technological developments. The business planning should be individualistic and primarily based on company’s internal strengths.

A business plan considers a compilation of different functional strategies, viz., research and development, marketing, finance and human resources. For understanding and developing business plans in the manufacturing sector, it can be divided into four segments, viz., Process Industry, FMCG, Capital Equipment and High-tech Consumer Products.

The broad choice of operation or manufacturing strategy for these sectors can be considered in the light of two major parameters: (1) Market Intensity and (2) Technology Intensity as represented in Figure 1. The manufacturing tasks are different in these sectors and hence require specific operational strategies. An account of different manufacturing strategies is presented in the following section.

Figure 1: Operation Strategy Matrix

SPECIFIC OPERATION STRATOGY:

Developing broad strategies require considering market needs and technology applications. Individual companies can look at developing company specific strategies, based on their objectives and nature of business. Some guidelines to develop specific operational strategy are as follows:

A. Manufacturing Tasks with respect to Product Strategy

Attainment of manufacturing efficiency could be a simple choice. One can look at the following as a means to enhance competitiveness.

Cost of Production:

This could be a strategy for manufacturers in the Process Industry, which is low market and low technology intensive. Here cost minimization of manufacturing process could be put to advantage for the competition. The process of reduction in the production cost should be done on a continual basis.

Product Flexibility:

The FMGC sector, which is highly market intensive and generally low technology focused, could go for product flexibility. One could look to manufacture market specific products, as per the changes in the product preferences and consumer needs.

Volume Flexibility:

Capital Equipment manufacturers, that are highly technology intensive and have a low market focus, could plan for volume flexibility for their manufacturing plan. Attainment of manufacturing efficiency should be the goal.

Product Performance:

This could be applied as an operations strategy in the sector which is highly market oriented as well as high technology intensive as in the case of those producing High-tech Consumer Products. Here the products are generally with short life and the time-to-market plays a key role in success. Focusing of innovation and product development to enhance product performance and provide competitive advantage.

B. Manufacturing Policy:

Decisions regarding the manufacturing policy play a vital role in the success of a unit in the process industry. The following could be the factors which one can consider while going for an appropriate manufacturing policy:

· Location and Scale of Manufacturing:

Proximity to market and raw material, rationalizes supply costs, while economies of scale bring down unit cost.

· Choice of Manufacturing Process and Technology:

Selection of technology/process should take into account its availability, congruity, cost, etc. A proven technology should be favoured to a new one.

· Span and Degree of Vertical Control:

Degree of control plays an important role in achieving manufacturing efficiency. With flat management structures, greater degree of efficiency can be achieved.

· Use and Role of R and D:

Benefits from research and development could come when product development and new products are introduced periodically and quickly. This is more important in the high technology-oriented manufacturing industries where the product life-cycle is short.

· Control of Production System:

Control of production system leads to an increase in efficiency. It brings down production time, minimizes wastage and controls cost as well. This process is most suitable for the process industry.

C. Stages of Strategic Role of Manufacturing:

Investing large amounts in manufacturing, to gain strategic advantage, cannot be done overnight. It takes several years and has to pass through different stages to transform manufacturing weaknesses in to strengths. The stages are not mutually exclusive and it is difficult for a company to skip a stage. These stages can be viewed within two extremes: At one end, production can offer little contribution to a company’s market success; at the other, it provides significant source of competitive advantage. The stages I and II ask for maintaining status quo, while stages III and IV look at changing the manufacturing strategy aligned with business strategy. The four different stages are as follows:

Stage I - Internally Neutral: Minimize Negative Impact of Manufacturing:

At this stage, manufacturing is considered incapable of influencing competitive success. Here, one must look at minimizing or neutralizing the negative impact of manufacturing. Manufacturing is kept flexible and performance is to be monitored through management control systems.

Stage II - Externally Neutral: Achieve Parity with Competitors:

Stage II also represents a form of manufacturing neutrality. The strategy, at this stage, could be to follow industry practices in matters regarding work force, equipment, purchases and the timing and scale of capacity additions. Here one should avoid introduction of major, discontinuous changes in product or process. To achieve manufacturing efficiency, one could go for gaining economies of scale related to production.

Stage III - Internally Supportive: Provide Credible Support to the Business Strategy:

Stage III requires organizations to make manufacturing actively support and strengthen the company’s competitive position. Here, manufacturing should be viewed as internally supportive and its contribution should be derived from and directed by overall business strategy.

Stage IV - Externally Supportive: Manufacturing as a Significant Contributor to the Company Advantage:

This is the most progressive stage of manufacturing development and arises when competitive strategy rests significantly on a company’s manufacturing capability. Here, efforts could be made to take advantage of the potentials of new manufacturing practices and technologies.

It is found, mostly, that companies in the process industry belong to stage II and some in stage III. Those in stage II could graduate to stage III to enhance their competing capabilities.

D. Capacity Utilization:

Capacity utilization plans an important role in reducing cost of production. Highly capital intensive units, where capital cost per turnover is high, could look for increasing the productivity of capital by increasing capacity utilization. Practice of uninterrupted production will lead to higher capacity utilization.

E. Market Penetration:

Companies, which are low market driven and low technology driven, need to increase market penetration and cost minimization. It also calls for continuous uninterrupted production. Mass production will bring down unit cost and one can gain price advantage.

F. Investments in Technology on a continual Basis:

Innovations are required both in process and product for companies in the process industry. Process innovations leads to control of costs and product innovation/product differentiation helps to cater to changing market needs. Some innovations in process technology have been exemplary and are given below. The net impact of these developments was reduction in cost of production.

In steel manufacturing development of Basic Oxygen Furnace (BOF) has been found to be cost advantageous. Similar effects were observed with Continuous Casting and Direct Reduction. In the cement production, dry process technology was developed in the fertilizer sector low heat rate was found to be more effective and low pressure technology was found a suitable choice in air separation.

Some examples of innovations in Product Technology are given in Table 3. The recent developments in the innovations in steel production are: (a) production of coated steel, and (b) production of thin cold rolled steel. Coated steel is used in the production of white goods with high aesthetic value. Thin cold rolled steel has the advantage of high strength with low tonnage. In cement sector, there have been developments in the form of (a) Premix; (b) Bulk Distribution; and © Small Package.

Table 2:

S.No.	Industry Sector	Process Technology Innovations
1	Steel	B.O.F Continuous Casting Direct Reduction
2	Cement	Dry Process
3	Air Separation	Low Pressure Technology
4	Fertilizer	Low Heat Rate

G. Logistic Issues:

a. Procurement and Distribution:

Logistics play an important role in cost rationalization. In the case of fertilizer production, while this is done throughout year, the consumption is done, generally, in a span of 4-6 weeks after monsoon. Looking at distribution issues could lead to reduction of storage cost.

Table 3:

S. No.

Industry Sector

Process Technology Innovations

Steel

Coated Steel

Thin Cold Rolled Products

Cement

Premix

Bulk Distribution

Small Package

b. Split Location:

Cement manufacture could look int having multi-location grinding units, closer to the markets.

c. Dispersed Users:

Similarly, the steel production can be done in bulk as semi-finished products and then these can be processed into finished goods in smaller, multi-location units.

H. Project Management:

Project management plays an important role in managing cost and time. Unless project time is controlled, the cost of project goes up as can be observed from the time-cost graph. Focusing to completing the project in time can maximize profits. When the project gets delayed, the payback period becomes more. This increases the cost of capital productivity become disadvantageous since the beginning of the project.

I. Equipment Maintenance:

Equipment maintenance is a critical issue. It involves the following activities.

· Availability of plant and equipment

· Management of spares

· Maintenance resource productivity

· Total productive maintenance

With the proper maintenance of plant, plant availability will be for longer duration. This will lead to reduction in production cost in the concepts of economics of scale. Management of spares enhances efficiency and leads to higher productivity. Here, the role of worker is of greater importance.

Figure 2: Time-Cost Graph

J. Employee Productivity:

Since the output per employee ratio is high in the case of process industry, to increase employee productivity, one need to look at workers’ motivation, job design and worker’s involvement in job design, job rotation and job enrichment.

CONCLUSION:

The process industry operations are quite different from typical manufacturing operations. One needs to look the issues of competition in an individualistic way and should concentrate on cost reduction more than that of enhancing uses of technology. Efficient application of resources will hold the key for such activities.

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