THE DECOUPLING OF PRODUCT AND PROCESS LIFE-CYCLES

When should a plant, if ever, adopt more flexible forms of production technology? The factors supporting the decision for a dedicated system are often based on the dedicated technology's lower fixed and variable costs with respect to production volumes. In many industries, it is clear that such cost-reduction techniques are essential to a firm's success. On the other hand, flexible manufacturing systems, though initially more expensive, eliminate the requirement for an immediate investment in a new process once the life span of a particular part or product has ended. Given these fundamental differences, it is clear that the question of whether a firm within an industry should select a manufacturing technology which is highly flexible or dedicated can be key to its long-term success. To gain a reasonable understanding of which decision is best, it is imperative that the relationships between innovation, market, and production costs be understood and quantified. The aim of this report is to analyse these vital connections in an attempt to shed further light on these questions. In this context, we introduce the notion of 'fast response process capability' as an alternative to the dynamic model of product and process innovation cycles introduced by Utterback and Abernathy (1975). We argue that this new framework will have a large strategic implication across the industry.