Brown et al. (2005) stated that “there is a need to view operations management as part of a fluid, interactive, mutually beneficial series of relationships between raw materials and the end customer.” Following this line of thought, the simplified structural model of a company’s production system in the process industries presented below illustrates the material transformation system from supplied raw materials into finished products to be marketed to external customers. After Storm et al., (2013).
Contextual conditions for innovation in the process industries
A number of general characteristics of companies in the process industries are not directly related to the production system but to company overall business models, which could be more or less important to consider in innovation. As a consequence of the fact that process companies often are very asset intensive and strongly integrated in one or a few physical locations, their ability to respond to change is often limited in the short term. Furthermore, the ability to create efficient value chains through an interlinkage of production plants, energy flows and infrastructures is second to none in large global operations, which is e.g. referred to as “Verbund” in the BASF company.
The equipment in the production process is often a rate-limiting factor contrary to other manufacturing industries in which the throughput may be limited more by labor. Thus, labor productivity is an important factor in the process industries, but asset productivity is typically far more important. Finally, there is generally low upstream product supply chain complexity and a high downstream product supply chain complexity (Tottie and Lager, 1995), creating a need for supply chain integration. The overall complexity of the downstream supply chain will influence collaborative development with customers.
Process-industrial production system characteristics – contextual conditions for product and process innovation
- Type of incoming materials
- Changeability of incoming materials
- Production yield dependency on raw materials
- Incoming material influence on finished products
Transformation system characteristics
- Production process structural characteristics
- Material flow pattern
- Material transformation process characteristics
- Type of transformational change process
- Time dependency of transformation process
- Production process technology life-cycle time
- Type of outgoing products
- Product life-cycle timeframe
- Product interrelationships in product portfolios
- Changeability of finished products
On one hand, it is concluded that the different sectors of the process industries share a large number of characteristics related to their production system. On the other hand, it is also concluded that the nature of the production systems in the process industries significantly differ from the nature of the production systems in other manufacturing industries (Lager, 2017). The consequence is that management best-practices, particularly related to productions management in other manufacturing industries, are of less interest within the process industries, while management best-practices for the process-industrial cluster of industries is likely to be most interesting to many, if not all, sectors of the process industries.
It is thus recommended that industry professionals from the process-industrial cluster of industries be observant and careful to learn from or transfer industrial tools, methodologies and best practices from other manufacturing industries and vice versa. This is well in line with the conclusion from a previous workshop related to innovation in a process-industrial context that concluded (Lager et al., 2013):
“ It is not to be said that prior research into management of R&D and innovation in general does not apply to the process industries, but rather that research results from other domains may very well be useful for the family of process industries as well. However, the idiosyncrasies of process firms are likely to influence the conduct of R&D and innovation and call for improved methods, tools and an actionable and improved knowledge base for R&D management and innovation.”
Inherent conditions for innovation in the process industries
Products manufactured in the process industries are not assembled components but are more or less homogeneous entities, and their inherent structures often determine their functionalities for the customers. The necessary time for the development of new process technology is often long in the process industries. The development from ideation to investment and industrial implementation in production plants often has a time frame of between five and ten years. However, the product development cycles in many of the process-industrial sectors are often extended in order to protect B2B customers or consumers from unexpected problems.
One striking difference between innovation in the process industries and in other manufacturing industries is the environment for experimental work. The environment for product pre-development activities and early experimentals is in a laboratory (Lager, 2000) in the process industries, while in other manufacturing industries, pre-development occurs in a design office. The development and design of a new or improved product in the process industries is thus in reality the development of a new or improved production process. Development of functional product prototypes in other manufacturing industries is replaced by test runs in pilot plants or full-scale production in the process industries, where test batches for customers are made and adequate process conditions are specified.
Process-industrial innovation characteristics – inherent conditions for product and process innovation
- Sources of product functionalities and their dependencies
- Necessary timeframe for process development
- Necessary timeframe for product development
- The innovation work process
- The environment for product pre-development activities and product design
- Ways of testing improved functionalities and processability
- Interdependencies between product and process development
- Collaboration with raw material suppliers
- Collaboration with equipment suppliers
- Application development with customers and end-users
The conclusion is that the particular product and process innovation environment common among sectors belonging to the cluster of process industries crave unique experimental facilities and development approaches of a clearly different kind than what is common in other manufacturing industries. Moreover, the interdependency between product and process development ,“the process embodies the product”, makes product development always related to the development of a new process and sometimes vice versa, a fact Marx already recognized, talking about “the process disappears in the product.” The development and design of a new or improved product is thus the development of a new or improved production process. The consequence is that experiences in conducting innovation in this kind of experimental environment can be easily shared among the different sectors of the process industries, while they are more or less of no use to other manufacturing industries.
Starting from a platform of Innovation & Technology Management current practices, future perspectives on the need for new approaches and tools specifically adapted to process-industrial conditions have been reviewed and discussed in a recent publication by Lager (2016).