Research J. Science and Tech. 9(4): October-December, 2017
ISSN 0975-4393 (PRINT)
Vol. 09| Issue-04|
October -December | 2017
Available online at
Research Journal of Science and Technology
Home page www.rjstonline.com
Operation Strategy in Process Industry
Dr. R.V.S. Prasad
Associate Professor, Department of Statistics, P.R.R. and V.S. Govt. College, Vidavaluru,
SPSR Nellore District, A.P., India.
*Corresponding Author E-mail: [email protected]
Fast changes in technology, competition and most importantly customer expectations are creating an
increasingly uncertain atmosphere for business. People tend to get attracted towards short-term gains putting
aside advantages of having long-term strategies. The manufacturing sector is being victimized by this
phenomenon. While it has been recognized that manufacturing holds the key to development, less emphasis has
been given to it. Enhancement of manufacturing practices in the process industry has been always been a lesser
priority. While many solutions can be developed to counter the process industry, it needs comprehensive and
concentrated efforts in designing its strategy to meet competition. This paper discusses the characteristics of
process industry and tries to focus on developing some specific options, which can be useful in confronting
KEYWORDS: Process Control, Product Control, Operation Strategy, Product Strategy, Procurement,
Distribution, Employee Productivity.
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
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.
Received on 21.09.2017 Modified on 04.11.2017
Accepted on 11.12.2017 ©A&V Publications All right reserved
Research J. Science and Tech. 2017; 9(4): 597-600.
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.
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
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.
Research J. Science and Tech. 9(4): October-December, 2017
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
Ferrous and Non-Ferrous Metal Production (Steel,
Aluminium, Copper, etc.)
Refining and Petrochemicals
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.
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
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.
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.
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.
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
Location and Scale of Manufacturing:
Proximity to market and raw material, rationalizes
supply costs, while economies of scale bring down
Choice of Manufacturing Process and
Selection of technology/process should take into
Research J. Science and Tech. 9(4): October-December, 2017
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
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
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
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
Stage II – Externally Neutral: Achieve Parity with
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
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
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
Research J. Science and Tech. 9(4): October-December, 2017
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 ©
S.No. Industry Sector Process Technology Innovations
1 Steel B.O.F
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
S. No. Industry Sector Process Technology Innovations
1 Steel Coated Steel
Thin Cold Rolled Products
2. Cement Premix
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-
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.
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
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Reproduced with permission of copyright owner. Further reproduction
prohibited without permission.
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