Focusing on Core Capabilities Operations Management Assignment Help

Focusing on Core Capabilities

In order to successfully implement an operations strategy be it within a manufacturing firm or within a service, certain core capabilities must be identified. These core capabilities  allow the firm to establish its competitive priorities in the  market place. Core capabilities can thus be defined as that skill or set of skills that the operations management function has developed that allows the firm to differentiate itself from its competitors. Similar core capabilities need to be identified in the other functional areas too  and each of these functional capabilities should be aligned to meet the overall goals of the firm. For example in the opening vignette to this chapter Dell Computer has developed a core capability for producing these new products both quickly and in a wide variety to meet the specific needs of individual customers. In order to focus on these core capabilities firms. both in manufacturing and services have begun to divest themselves of those activities that are not considered to be critical to their success. In manufacturing more ‘and more components and sub assemblies that were previously built in-house are now being subcontracted or.outsourced to suppliers. As a result the material cost in most manufacturing companies as a percentage of total manufacturing costs  has substantially increased in recent years. On the other hand. the labor co t. as a percentage has been drastically reduced  often to less than 5 percent of total costs.In order to successfully implement an operations strategy be it within a manufacturing firm or within a service certain core capabilities must be identified. These core capabilities  allow the firm to establish its competitive priorities in the marketplace. Core capabilities can thus be defined as that skill or set of skills that the operations management function has
developed that  allows the firm to differentiate itself from its competitors. Similar core capabilities need to be identified in the other functional areas too and each of these functional capabilities should be aligned to meet the overall goals of the firm. For example in the opening vignette to this chapter Dell Computer has developed a core capability for producing these new products both quickly and in a wide variety to meet the specific needs of individual customers. In order to focus on these core capabilities  firms both in manufacturing and services  have begun to divest themselves of those activities that are not considered to be critical to their success. In manufacturing more ‘and more components and sub assemblies that were
previously built in-house are now being subcontracted or.outsourced to suppliers. As a result the material cost in most manufacturing companies  as a percentage of total manufacturing costs has substantially increased in recent years. On the other hand. the labor co t. as a percentage has been drastically reduced often to less than 5 percent of total
costs. This focus on core capabilities also has impacted services. More and more service operations are now subcontracting out ancillary support services that were previously provided in-house. Again this strategy has allowed these services to concentrate on improving their core capabilities. For example many colleges and universities now subcontract their food service operations to firms such as Sodded and their bookstore operations to retailers such as Barnes and Noble. As another example  Service Master has built a very successful business providing housekeeping services to hospitals and office buildings
at substantial savings to these businesses. In many instances the companies that have subcontracted these support services have discovered that the subcontractors can perform them better and at a lower cost than when they were done internally. This focus on core capabilities further supports the concept of a value chain. Here each company focues on its core capabilities thereby allowing it to maximize its value contribution to the end product that is provided to the customer. (A word of caution however  Casually subcontracting a function that is not viewed as a core competency may result in losing knowledgeable people who know how the broader system operates and who can deal with unexpected emergencies that might shut down a core activity

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