The operations strategy literature discusses the importance of defining the appropriate production process to support the competitive priorities specified in the business strategy. Building on the works of Skinner (1969) and Abemathy and Townsend (1975), this hierarchical structure was further analyzed by Hayes and Wheelwright as they looked at the relationships between marketing and operations. They suggested that there should be a link between product plans and process choice that supports the overall business strategy (Hayes and Wheelwright, 1979). Furthermore, they contended that firms operating on or close to the diagonal of the product-process matrix will outperform those that hold significantly off-diagonal positions (see Figure 1). Much of the operations strategy literature since then has supported their assertions, and many operations management texts use the model to describe process choice in manufacturing.
More recently, research has been conducted to validate empirically whether firms actually link their process choice to product volume and customization and whether those decisions result in better performance. Safizadeh et al. (1996) in a study of 144 U.S. manufacturing plants, found that process choice was linked to product plans and competitive priorities and that there was some evidence of improved performance when they were well aligned. However, the authors recognized that some batch shops and continuous flow shops were able to increase their ability to customize products through flexible manufacturing systems and by using common parts and subassemblies.
Their work suggests that as flexibility increases it may be possible to move away from the diagonal on the matrix and still be successful. The authors go on to suggest that flexibility is a "complex phenomenon and the literature has gradually uncovered its multiple dimensions and their strategic implications." They also note that companies may appear to be off the line because product and process choices don't happen simultaneously. Companies may have partially implemented processes that would move them closer to the diagonal, but not have the processes completely in place. More work is required to determine the true relationship between process choice and product customization.
About the same time, other researchers felt it was necessary to continue to validate the Hayes and Wheelwright model, given changes in manufacturing technology and practice. McDermott, Greis, and Fischer (1997) conducted an in-depth study of nine firms that made up 95% of the total U.S. market for portable electric tools. Through surveys, semi-structured interviews, and plant tours, they determined that new production technologies and practices enable firms to provide flexibility, responsiveness, and low-cost production at the same time. Their results suggested that the process-product trade-offs may have changed and that the Hayes and Wheelwright model may no longer be suitable for describing the environment in that particular industry. They proposed that models based on mass customization (Pine, Victor, and Boynton, 1993) and...