PHYSICAL PROCESS + ORDER HANDLING
Process management, as the term is commonly understood, is not the concern of
this section any more than the management of selling, finance, technical or
company investments; but the principles of physical processes must be a serious
concern of top management in any business that produces or distributes physical
products. For in every such business the ability to attain performance goals
depends on the ability of physical processes to supply the products in the
required time or with the required flexibility. In any processing enterprise,
ability to produce physically has to be taken into account when setting
business objectives. Management's job is always to push back the limitations
set by the hard reality of physical process facts. It must so manage its business
as to convert these physical limitations into opportunities for the Company.
There is, of course, nothing new in this. Yet traditionally management reacts
to the physical limitations of physical processes by putting pressure on its
process function: there are few areas in which 'management by drives' is as
common. Furthermore physical process people themselves see the answer in a
number of techniques and tools, ranging from machine design to industrial
Neither, however is the key. To push back the physical limitations or to
convert them into opportunities requires first that management understand what
system of physical processes its operations require and what the principles of
that system are; and second that it apply these principles consistently and
thoroughly. Physical process is not the application of tools to materials. It
is the application of logic to work. The more clearly, the more consistently,
the more rationally the right logic is applied, the less of a limitation and the
more of an opportunity do ‘physical processes’ become.
Each system of physical processes makes its own demands on the management of
the business - in all areas and on all levels. Each requires different
competence, skill and performance. One set of demands is not necessarily
'higher' than another, any more than non-Euclidian geometry is higher than
Euclidian geometry. Yet each is different, and unless management understands
the demands of its system of physical processes, it will not manage well.
This is particularly important today when many businesses are moving from one
system of physical processes into another. If this move is considered a mere
matter of machines, techniques and gadgets; the business will inevitably reap
only the difficulties of the new system which involves new principles, and one
must understand what are these difficulties.
There are three basic systems of physical processes:
1) Unique-product physical processes
2) Mass physical processes
3) Analogue physical processes
One may perhaps count four systems:
physical processes inflexible, that is, the
physical processes of uniform products, is
physical processes flexible, which supplies uniform components
but assembles them into diversified
these systems has its own basic principles; and each makes specific demands
two general rules for advancing physical processes performance and pushing
limitations of physical processes are pushed back further and faster, the
more consistently and thoroughly the principles pertaining to the system in
use are applied.
The systems themselves
represent a distinct order of advance, with unique-product physical processes
the most advanced. They represent different stages of control over physical
limitations. This does not mean that opportunities for advance lie everywhere
in moving from the unique-product system to the physical processes system.
Each system has its specific applications, requirements and limitations. But
it does mean that one advances to the extent to which one can organize
components of physical processes on the principles of a more advanced system;
and learn, at the same time, how to harmonies the two systems within the
There are also two general rules concerning the demands on management
competence made by each system.
differ not just in the difficulty of their demands, but in the variety of
competence and the order of performance. Management, in moving from one
system to another, has to learn how to do new things rather than learn to do
the old things better.
The more we succeed
in applying consistently the principles of each system, the easier it becomes
for management to satisfy its demands.
Each management has to meet the demands of the system it ought to have
according to the nature of its product and physical processes, rather than
those of the system it actually has. Being unable or unwilling to apply what
would be the most appropriate system only results in lack of performance; it
does not result in lower demands on management. Indeed, it inevitably increases
the difficulties of managing business.
One case in point is constant flow processing, which has (in the 'batch
process') primarily a unique-product system. There is probably no section of
industry that has worked harder or more successfully on perfecting a unique-product
system. Yet the problems the managements of these companies face are all
physical processes problems: high fixed capital requirements and the need for
continuous physical processes resulting in high break-even points, the need for
a high and constant level of business, the need to make basic investment
decisions for a long time ahead, et cetera. At the same time these industry
sectors enjoy few of the benefits of physical processes.
It is, in summary, of major importance in managing a business to know which
system applies; to carry its principles through as far as possible; to find out
which components of physical processes can be organized in a more advanced
system and to organize them accordingly; to know what demands each system makes
Furthermore where, as in the constant flow process industry sectors, historical
and technological obstacles have barred the organization of physical processes
in the appropriate system; it is a major challenge to management to work
systematically on overcoming these obstacles. Indeed, emphasis in such a
situation should not be given to working a little more effectively what is
basically the wrong system. One is convinced that a great deal of the
tremendous technological effort in the certain industries has been misdirected.
Focused on improving the traditional process, it will turn out to have been
wasted when processing will finally become a physical process; which is in all
probability not too far off any more. A business using the wrong system has to
satisfy all the demands that the appropriate and more advanced system would
make on management, yet, it does not have the wherewithal to pay for them, for
this can come only out of the increased ability to produce what the more
advanced system provides.
What, then, concretely are these three systems of physical processes and their
1. UNIQUE-PRODUCT PHYSICAL PROCESSES
In the first, the physical processing of a unique product, each product is
self-contained. Of course, strictly speaking, there is no such thing as process
unique products - they are produced only by the artist. But building an
aircraft, a big turbine or a skyscraper comes close to turning out a unique
product. So is the building of a house, and in most cases 'batch physical
processes' in a job shop.
Under this system the basic principle is organization into homogeneous stages.
In the building of the traditional single-family house (one of the simplest
examples of unique product physical processes) we can distinguish four such
stages. First, digging the foundation and pouring concrete for the foundation
walls and the basement floor. Second, putting up the frame and the roof. Third,
installing plumbing and wiring equipment in the inside walls. Finally, interior
finishing. What makes each of these a distinct stage is that work on the house
can stop after each is completed, without any damage - even for a fairly long
time. On the other hand, within each stage, work has to be carried right
through; or else what has been done already will be damaged and may even have
to be done again. Each stage can be varied from house to house without too much
trouble or adjustment and without delaying the next stage. Each of these stages
by the inner logic of the product, that is, of the house, is an entity in
Unique-product physical processes, with its organization of the work by
homogeneous stages, is radically different from craft organization, in which a
specialist does all the required work for his particular specialty. Properly
organized, unique-product physical processes does not go by craft skills but by
stage skills. The model is the telephone installation man who, without being a
skilled electrician, carpenter, plumber or roofer, installs electric wiring,
saws through boards, makes a ground connection and can take up a roof shingle
and replace it. In other words, either every man engaged in the work of a
particular stage must be able to do everything needed within that stage; or, as
in the building of a big turbine, there must be an integrated team for each
stage which contains within itself all the stage skills needed. No skills are
needed by an individual or team that goes beyond the requirement of the
This is largely how one succeeds in building ships at such a tremendous rate
during wars. It was not mass physical processes that resulted in the
unprecedented output of ships. It was the division of the work into homogeneous
stages; the systematic organization of the work group for the specific requirements
of each stage; and the systematic training of a large number of people to do
all the work required within one stage. This in turn made possible the
progressive scheduling of the work flow which was the greatest time saver.
2. MASS PHYSICAL PROCESSES INFLEXIBLE AND FLEXIBLE
Mass physical processes is the assembly of varied products - in large numbers
or small - out of uniform and standardized components.
In most industries mass physical processes is today the prevailing system. It
is, and with good reason, considered to be the typical system of an industrial
society - though analogue physical processes may soon become a strong
So universal is mass physical processes today that it might be assumed that we
know all about it, certainly that we know all about its basic principles. This
is far from true. After forty years we are only now beginning to understand
what we should be doing. The reason for this is that the man who ushered in
mass physical processes as a universal system misunderstood and misapplied it -
so often the fate of the pioneer.
When Henry Ford allegedly said that 'the customer can have any color car as long as
it's black', whether he said it or not, it was not a joking. It was meant to express the essence of mass
physical processes as the manufacture of uniform products in large quantity. Of
course, he knew that it would have been easy to give his customers a choice of
colors; all that was needed was to give the painter at the end of the assembly
line three or four spray guns instead of one. But Ford also realized, rightly,
that the uniformity of the product would soon be gone altogether once he made
any concession to diversity. Thus to him the uniformity of the product was the
key to mass physical processes.
This inflexible mass physical processes is however, based on a
misunderstanding. It is the essence of genuine mass physical processes that it
can create a greater diversity of products than any method ever designed by
man. It does not rest on uniform products. It rests on uniform components which
can than be mass-assembled into a large variety of different products.
The model of mass physical processes is therefore not the old Ford assembly
line. It is rather the farm equipment manufacturer who designs and makes
specialized cultivating machines for large-scale farming on irrigated land -
where each one of the designs is unique. They make, for instance, a machine
that performs with various attachments, all operations needed in large scale
cucumber growing from preparing the hills in the spring, then harvesting
cucumbers at the right stage of their growth, then picking them. They rarely
make more than one of each machine at a time. Yet every one of the more than
seven hundred different machines is made up entirely of mass-produced, uniform,
standardized components, which someone in the industrial background turns out
by the thousands. Their biggest job is not to solve the problem of designing a
machine that will identify cucumbers of the right ripeness for picking, but to
find a mass producer of part that, though originally designed for an entirely
different purpose, will, when put on the cucumber cultivator, do whatever is
The specific technique for applying this principle is the systematic analysis
of products to find the pattern that underlies their multiplicity. Then this
pattern can be organized so that the minimum number of produced components will
make possible the assembly of the maximum number of products. The burden of
diversity, in other words, is taken out of process and shifted to assembly.
Physical processes in a company is physical processing of components -
even though the final products are widely different. The burden of variety is
thrown on assembly. The components themselves can be produced continuously
against a schedule determined by the size of the capacity rather than by
customer orders and the size of the capacity is again determined by the time
needed for assembly and delivery.
This flexible mass physical processes is the most immediately useful
physical processes concept that we have in our possession today. It is above
all the logical methods of 'Operations Research' that allow us to take the
complicated analyses of products and components that are necessary to put the
correct mass physical processes into effect.
Wherever this new principle has actually been applied, cost reductions have
been spectacular sometimes reaching 50 or 60 percent. Nor is its application
confined to the physical processes process itself. By making it possible to
keep a capacity in component form instead of in aggregated form, it
often enables a company to cut its costs and yet give the customer better
This new principle does achieve, in other words, what Henry Ford was after: the
continuous physical processes of uniform things without interruption because of
an irregular flow of customer orders, or the need to change tools, styles or
models. But it does this not by producing uniform products but by producing
standardized components. Uniformity in process is coupled with diversity in
Obviously the application of the mass physical processes principle is not
simple. It goes well beyond process and requires hard and extensive work on the
part of the marketing people, engineers, financial people, personnel people,
purchasing agents and so forth. It carries risks as it must be based on a
fairly long physical processes cycle at a constant rate of machine utilization
- three, six, in some cases, eighteen months. It requires new accounting tools.
Flexible mass physical processes can also not be put in overnight - the
development in some companies will take years. But so great are the savings
that a company will recover the expense of a virtually complete redesign of its
products and process facilities in fewer than two years.
3. ANALOGUE PHYSICAL PROCESSES
The third system is analogue physical processes. Here process and product
The oldest example of an analogue industry is that of oil refining. The end
products that a refinery will obtain out of crude oil are determined by the
processes it uses. It can produce only the oil distillates for which it is
built and only in definite proportions. If new distillates have to be added, or
if the proportion between the various distillates is to be changed
significantly, the refinery has to be rebuilt. Analogue processes is the rule
in the chemical industries, and it is, with minor variations, the basic system
of a bulk flow processing or continuous flow plant.
Both mass physical processes flexible and analogue physical processes
are ready for Automation and Technological Development.
Performance Grid Definitions
Management must demand that those responsible for physical processes know which
system of physical processing is appropriate, and apply the principles of that
system consistently and to the limit. These are the first and decisive steps in
pushing back the limitations of physical processes on business performance.
Only when these steps have been taken can the next one be made: the
organization of components of physical processes on the basis of a more
The result of doing this without first analyzing the physical processes process
and organizing it properly is shown by the failure of many kit-built products.
It would seem the most obvious thing in the world to build a house from
prefabricated, standardized components. Yet the attempt, when made after the
Second World War, proved abortive.
The reason was that uniform, standardized components - mass physical processes,
in other words, were superimposed on a badly disorganized unique-product
system. Instead of homogeneous stages, the organizing principle was craft
organization. The use of prefabricated components in a craft system proved more
expensive and slower than the old methods. When, however, one company organized
home building by homogeneous stages, they could immediately use uniform
standardized prefabricated components with conspicuous savings in time and
Similarly, standardized components brought no savings in a repair shop as long
as it was craft-organized. When the work was organized in teams, each containing
all the skills needed in a particular stage of the work, when in other words,
craft organization was replaced by stage organization, standardized components
brought tremendous savings.
This is of particular importance in a mass physical processes industry, which
produces diversified products. For there the great opportunity lies in the
application of Automation; and this can only be achieved if physical processes
are properly understood and organized as the manufacture of uniform components
and their assembly into diversified products.
But management must also know what the various systems of physical processes
demand of its own competence and performance.
In unique-product physical processes, management's first job, it might be said,
is to get an order. In mass physical processes, the job is to build an
effective distributive organization and to educate the customer to adapt his
wants to the range of product variety. In analogue physical processes, the
first task is to create, maintain and expand a market and to find new markets.
processes has high costs for the individual product but great flexibility in
Mass physical processes flexible has
the ability to supply wants cheaply and within a wide and flexible range of
products. But it requires much higher capital investment than unique product
physical processes and a much higher level of continuous activity; it involves inventory
risks; and it needs a distributive organization that can sell continuously
rather than one that goes after a specialized, individual order.
physical processes requires the highest capital
investment (in absolute values) and the most nearly continuous operation. Also,
since products and process have, so to speak, become one, new products will be
created by changes in the process even if there is no demand for them in the
existing market; a common occurrence, for example, in the chemical industry.
Management must therefore develop new markets for any new products as well as
maintain a steady market for the old. Indeed, under Automation it is a major
responsibility of management both in mass physical processes and in analogue
physical processes to maintain a steadier level of economic activity and to
prevent extreme economic fluctuations, whether of boom or of depression.
Under the unique-product system the time-span of decisions is short. Under mass
physical processes it becomes longer: a distributive organization, for
instance, may take ten years to build. But under a process system decisions are
made for an even longer future. Once built, the physical processes facilities
are relatively inflexible and can be changed only at major expense; the total
investment may be large; and the development of a market is long range. The
marketing systems of the big oil companies are good examples. The more advanced
the physical processes organization, the more important are decisions for the
Each system requires different management skills and organization.
Unique-product physical processes requires
people good at a technical function.
Mass physical processes - inflexible
and flexible - requires management trained in analytical thinking, in
scheduling and in planning.
Flexible mass physical processes as well as analogue physical processes requires
management trained in seeing a business as a whole in conceptual synthesis and
Under unique-product physical processes management can be centralized at the
top. Co-ordination between the various functions is needed primarily at the
top. Selling, design, engineering and physical processes can all be distinct
and need only come together where company policy is being determined. It is
this pattern of unique-product physical processes that is still largely assumed
in our organization theory - even though unique-product physical processes may
well be the exception rather than the rule in the majority of industry today.
Mass physical processes inflexible can still maintain this pattern,
though with considerable difficulty and at a high price of efficiency. It does
better with a pattern that establishes centers of decision and integration much
further down. For it requires close co-ordination between the engineers who
design the product, the physical processes people who make it, the sales people
who market it, and so forth.
In both mass physical processes flexible and analogue physical
processes, functional centralization is impossible. They require the closest
co-operation of people from all functions at every stage. They require that
design, physical processes, marketing and the organization of the work be
tackled simultaneously by a team representing all functions. They require that
every member of the team both know his own functional work and see the impact
on the whole business all the time, and decisions affecting the business as a
whole have to be taken at a decentralized level - sometimes at a level not even
considered as 'management' today.
There are significant differences with respect to the work force and its
management. Unique-product physical processes can usually adjust its work force
to economic fluctuations, keeping in bad times only foremen and a nucleus of the
most highly skilled. It can, as a rule, find what other skills it needs on the
labor market. Precisely because they have limited skill, the workers in inflexible
mass physical processes must increasingly demand employment stability from the
enterprise, and in any business that uses Automation (whether flexible
mass physical processes or analogue physical processes) the enterprise itself
must make efforts to stabilize employment. For the work force needed for
Automation consists largely of people trained both in skill and in theoretical
understanding. It not only represents too great an investment to be disbanded;
it can normally only be created within the company and with years of effort. It
is neither accident nor philanthropy that the oil companies - typical process
businesses - have tried so hard to keep employment steady even in bad
Under Automation there are few ' workers'. As said before,
Automation will not (in the traditional sense of the work) cut down the total
number of people employed - just as mass physical processes did not do so. What
we can see so far in the process industries shows clearly that the total work
force does not shrink. On the contrary, it needs to expand. But Automation
requires totally different workers who are actually much closer to the
professional and technical specialist than to today's physical processes
worker. This creates a problem of managing people that is quite different from
any 'personnel management problem' business men are normally familiar with.
One has learned to be extremely skeptical of any prediction of imminent
revolution or of sweeping changes in technology or business organization. After
all, today, two hundred years since the first Industrial Revolution there still
flourishes in our midst the garment industry, a large industry organized on the
'putting-out' system which, the textbooks tell us, had become obsolete by 1750.
It would not be difficult to find other examples of such living ancestors who
are blissfully (indeed profitably) unaware that they died a long time ago.
Certainly the obstacles to the Automation revolution are great - above all, the
lack of men properly trained in the new concepts and skills. Also it has been
estimated that only one quarter of industries could readily benefit from
Automation at the present state of its technology. Even a real 'Automation
revolution' would be a gradual and highly uneven process.
Still revolutions do happen - and in the industry there will be one powerful
force pushing towards an Automation revolution in the next decade: the shortage
of workers. As a result mainly of the lean birth years of recent decades. Yet,
the total population will go up much faster, even if present record birth rates
should not be maintained. To reach minimum growth objectives indicated by
population figures, technological progress and economic trends would require,
in many companies, a doubling of the labor force, were physical processes to
continue on the present system.
Even without a resolution, the most significant, the most promising and most
continuous opportunity to improve the performance of business enterprise will
not lie, for decades to come, in new machines or new processes. It will lie
first in the consistent application of the new mass physical processes
principle and secondly in the application of the principles of Automation. The
techniques and tools of physical processes management will continue to be a
specialized subject with which only physical processes people need to be
familiar. But every manager will have to acquire an understanding of the
principles of physical processes - above all, an understanding that efficient
physical processes is a matter of principles rather than of machines or
gadgets. For without it he will not, in the decades ahead, adequately discharge