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A firm's capability is the firm's ability to do something effectively, says professor bowon Kim. Without capability, the firm cannot enjoy competitive advantage, he says. Controllability versus Flexibility Flexibility refers to the firms' ability to cope with uncertainties.
A firm's capability is the firm's ability to do something effectively, says professor bowon Kim. Without capability, the firm cannot enjoy competitive advantage, he says. Controllability versus Flexibility Flexibility refers to the firms' ability to cope with uncertainties.
A firm's capability is the firm's ability to do something effectively, says professor bowon Kim. Without capability, the firm cannot enjoy competitive advantage, he says. Controllability versus Flexibility Flexibility refers to the firms' ability to cope with uncertainties.
Supply Chain Management A Learning Perspective Lecture 2 Coursera KAIST: SCM101 2014 Bowon Kim Management Capability Capability is the firms ability to do something effectively. Hayes and Pisano (1996) defined capabilities as the activities a firm can do better than its competitors. Without capability, the firm cannot enjoy competitive advantage. Reference Bowon Kim & Chulsoon Park (2013): Firms integrating efforts to mitigate the tradeoff between controllability and flexibility, International Journal of Production Research, 51:4, 1258-1278. Controllability versus Flexibility Narasimhan et al. (2005) posited four performance capabilities: new product development, flexibility, efficiency, and market-based performance. Kim (2005) developed a framework that further separates various firm capabilities into three categories: controllability, flexibility, and integrating capability. Controllability versus Flexibility Controllability is the firms ability to control its processes. Its primary objective is to achieve superb efficiency that minimizes cost and maximizes accuracy and productivity. It often requires the ability to meet the specification exactly as demanded by the customer, thus enabling the firm to tightly control its processes. Controllability versus Flexibility Flexibility is the firms ability to cope with uncertainties, both internal and external. It refers to the firms ability to change or react, incurring few penalties in time, effort, cost, or performance, as well as to respond effectively to changing circumstances. Over time, it is clear that the interest in manufacturing flexibility has evolved from that of an intra-firm to an inter- firm relationship. Tradeoff between Capabilities Short-term relationship between capabilities Is there any relationship between these capabilities? Skinner (1969) first postulated a trade-off relationship between competitive priorities, i.e., operations performances. A case at 3M, where the company was struggling with the conflicting relationship between efficiency and flexibility Another empirical evidence a clear inverse relationship between cost and flexibility. Key questions First, is there an inherent tradeoff relationship between controllability and flexibility? Second, does the firms integrating effort enable it to overcome such a tradeoff relationship, making it possible to improve both controllability and flexibility simultaneously? Tradeoff between Capabilities Controllability Flexibility R 1 F 1 F 2 C 1 C 2 Integrating Capability Controllability Tradeoff Relationship Flexibility Integrating Capability Integrating capability is firms ability to integrate and coordinate diverse functions and parts of its value chain, embodied in overall operations effectiveness and new product innovation. Firms ability to integrate various activities, both internal and external to the firm, in order to achieve optimal coordination between supply chain partners. Relevant concepts: experimentation, cross-functional teamwork, group problem solving, customer as well as supplier integration into the product development process Because the integrating capability is driven by a firms ability to integrate and coordinate diverse functions and parts of its supply chain, it is often embodied in overall operations effectiveness and new product innovation, involving a wide-ranging integration requiring cross-functional capabilities.
Dynamic Changes of Capability Long-term dynamics of capability Firm A in 1970s
Firm A in 1980s
Firm A in 1990s
Firm A in 2000s
Firm A in 2010s
Strategic choice made by the company
C 1970 C 1980 F 1980 F 1970 Controllability Flexibility Chain of Capability Basic capability Process-level capability System-level capability Performance Overall knowledge and experience in - Process - Manufacturing - Safety - Engineering - Work ethics Individual function Individual process: - Assembly - Process quality - Welding - Cutting Responsiveness (quick delivery) Lead-time Overall quality Design NPD capability Increased revenues Increased profits Customer satisfaction Customers can observe the firms system-level capability only. Chain of Capability B a s i c
P r o c e s s
S y s t e m
C h a i n
o f
c a p a b i l i t y
Customer Satisfaction! Continuous Growth! High Performance! System level improvement Group implement skills Individual technical skills Trust/Mutual goals Internalization of the innovation process P e r f o r m a n c e
Basic Capability General knowledge/experience in -Management -Engineering, safety -Work ethics; culture Process Capability Technical knowledge, skills Specific function-oriented Process control E.g., welding, marking, cutting, System Capability System-level integration capability E.g., flexibility, responsiveness, Integrating process knowledge Incremental versus Radical Improvement Time Time Relative Level Relative Level Incremental Improvement Radical Improvement