As a human being, we all consume products and/or services all the time. This morning you got up and ate your breakfast, e.g., eggs, milk, bread, fresh fruits, and the like. After the breakfast, you drove your car to work or school. At your office, you used your computer, perhaps equipped with 27” LCD monitor. During your break, you drank a cup of coffee and played with your iPhone. So on and so forth. You probably take it for granted that you can enjoy all of these products. But if you take a closer look at how each of these products can be made and eventually delivered to you, you will realize that each one of these is no short of miracle. For example, which fruit do you like? Consider fresh strawberries. In order for the strawberries to be on your breakfast table, there must be numerous functions, activities, transactions, and people involved in planting, cultivating, delivering, and consuming strawberries. Moreover, all of these functions, activities, transactions, and people are connected as an integral chain, through which physical products like strawberries themselves and virtual elements such as information and communication flow back and forth constantly. By grouping related functions or activities, we have a supply chain, comprised of four primary functions such as supplier, manufacturer, distributor, and finally consumer. A supply chain is essentially a value chain. For the society or economy as a whole, the goal is to maximize value, i.e., to create satisfactory value without spending too much. In order to create the maximum value for the strawberry supply chain, every participant in the chain must carry out its function efficiently. In addition, all of the members must coordinate with each other effectively in order to ensure value maximization. We have to face the same issues for almost all the products and services we take for granted in our everyday life, e.g., cars, hamburgers, haircuts, surgeries, movies, banks, restaurants, and you name it! In this course, we want to understand fundamental principles of value creation for the consumers or the market. We try to answer questions like how the product or service is made, how the value-creating activities or functions are coordinated, who should play what leadership roles in realizing all these, and so on. As our course title hints, we approach all of these issues from a learning perspective, which is dynamic in nature and emphasizes long-term capability building rather than short-term symptomatic problem solving.
Chain of Capability
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From the course by Korea Advanced Institute of Science and Technology
Supply Chain Management: A Learning Perspective
328 ratings
Korea Advanced Institute of Science and Technology
328 ratings
From the lesson
Management Capability
Effective SCM requires the firm to have strong operations capabilities. One can group various operations capabilities into three representative capabilities: Controllability, flexibility, and integrating capability. In order to be competitive in the market, the firm must retain high levels of these capabilities. In this chapter, we will discuss what the management capabilities are and the relationship among these capabilities.
Meet the Instructors
Bowon KimProfessor
KAIST Business School
Okay, now I want to talk about
another perspective to understand forms capability.
The perspective I talked about so far,
was trying to categorise capabilities into three.
Controllability, flexibility, and integrating capability.
And I would say that that perspective is sort of horizontal perspective.
And another perspective I want to talk about now is more vertical.
In the sense that we can see
sort of some hieracal relationship among these capabilities.
Let me just explain, what are the capabilities
we can define from more you know vertical
perspective, and I define that as chain
of capability, chain of capability.
Why?
Because there is a certain relationship,
was sequence relationship among these capabilities.
The first capability I call basic capability.
Basic capability and then there is processed level, or process capability.
And then there is system level capability.
And I suggest that only when the
firm manages all these, the capabilities effectively.
The firm can achieve high performance.
And now let's you know, look at it one by one.
Basic capability is the firm's capability.
About over all things.
Very comprehensive capability.
It's not related with a specific function.
It's not related to the specific activity.
Nowadays, it's very popular in Korea for the managers to learn some courses in
humanity, history, or some art, or some meditation, and so on and so forth.
And you can see that we can now connect, you know,
those subject with the particular
functions, and particular activities and visions.
There is no seemingly identifiable causing effective relationship
between those overall understanding and a particular business function.
But nevertheless the companies have spent some money, and time and effort.
To have it's managers to learn these basic things.
So it's not just about, you know, knowledge of
things, it also relates to it's corporate culture, okay.
Or sometimes it also, meaning that you know, relations with the community.
And it also is about work ethics.
When you work alone, when nobody watches you,
are you still, you know, faithful?
And are you still committed to making things right?
Following the right procedures, and so on and so forth.
It doesn't matter whether you are constantly watched, or supervised or not.
You got to do what you supposed to do under any circumstances.
That's kind of a work ethics.
If the company or if the employees and workers at the companies,
do not have a work ethics then the product and services made by the
company, can not retain their required integrable quality.
But work ethics, some people might say that not, cross
your rates do it any particular functions and particular activity.
So work ethics is just very over all competence.
Overall managerial competence.
Overall you know, overall efficacious, right?
So ethics are very basic ingredient to the human being.
So basic capabilities is something like this, overall knowledge,
overall experience in you know, process and engineering and
safety and work ethics and also it involves this you know,
cultures and community activities and so on and so forth.
Nevertheless this is very important even if we can not connect basic capability
with any particular function, particular activity in particular task.
But I would just say that the company must have basic capability.
Or I would just say their managers and
workers at the company, must have basic capability.
Once they have basic capability, then
they can develop their process level capability.
What's the big difference between this process
level capability and the basic level capability?
Process level capability means that it is related with a particular
function, a particular activity and particular process and particular task.
So it has very clear goal about what is the, what is the job that must be done.
For instance a company might have a very good ability in terms of assembly.
Which is one particular function, one particular task.
Or, a company probably had very good welding skills or
cutting skills, or sometimes we can think about a company
as very good design skills, or the company has very
good you know, marketing skills and so on and so forth.
So, whether the company has, ability for specific function, for specific
task, for specific process, that's the process we are capable of.
But in order to complete a product, in order
to make a product to service for the customers.
Individual process level abilities are not enough.
You gotta be able to combine all of those things together.
In other words you have to have some
ability to achieve overall quality, to find quality.
And overall design, and I would say this is more really to do with the aesthetics.
Right.
And overall image of the product, overall image of the services.
And sometimes it's very important to, to deliver.
Deliver the product and services to the customers at
the right time, at the right price, the right location.
So, system level capability
implies overall responsiveness, overall responsiveness.
To the change in market demand and to, di, diverge, you know customers requirement.
Or, we would just say that this is re, re, related to it's the
firm's capability to conduct new product development activities.
Most effectively, and most efficient in so on and so forth.
So now, we can see that the system-level
capability is closely related with the final product,
or final service.
Okay.
So now we have three levels, three levels or layers of capability.
Base capability very overall knowledge,
overall experience, overall competence, cultural
issues, community issues, work ethics
issues, safety issues, overall mine design.
And once you have that base capability done, we can talk about specific
function related capability, specific function based ability.
Assembly, welding, cutting or you know, very
specifically designed process quality and you know.
Design issues and marketing and individual functions.
But in order to have superb, finer product and finer services,
you know, excelling at individual function is not enough.
You've gotta have some intuiting ability again.
Right.
You gotta be able to combine all those things together, and then you
deliver it to your customer at the right time, at the right price and
at the right location, in the right location and overall esthetic
design and new product develop capability and high performance.
Overall, product performance.
Overall, effectiveness of services.
That's a system-level capability.
And only when, all this three diverse capabilities are performed.
Effectively harmoniously, and the firm will be able to achieve high performance.
Revenues, more revenues, more sales, profits, and satisfaction.
But I want to point out one practical problem.
From the customers perspective.
They don't actually care about the form's
basic capability, and form's process level capability.
The customers, okay?
Let's say, the customers.
[BLANK_AUDIO].
The customers only care about forms system-level capability.
In other words, let's say I want to buy a car.
I want to buy a car.
But as a customer, I'm concerned about whether the company will deliver the
car to me in my right location, at the right time, at the right price.
And I'm concerned about this overall beauty
of the car, overall quality of the car,
whether the design is great or not, whether
it has you know, functionality as I expected.
These are the kind of things I am concerned about, I am interested in.
I don't actually concerned about whether the company is very good at writing.
I don't, you know, I don't pay too much attention to whether the company is
great at assembly, or process quality and cutting
and marking, and, so on and so forth.
And basically I probably don't want to know about
whether the workers at the company have work ethics.
I probably, not very much interested in the company's culture, in company's
overall knowledge or the, the company's
managers and employees level of understanding humanities.
Those are not something I'm concerned about as a customer.
And I think that that's fair, that's okay,
I mean the, that, that should better right?
If every customer's concerned about the
company's culture and process level capability.
Things can be so complicated, right?
So, basically the market, the customers don't
care about process level capability, basic level capability.
They only concerned about this system level capability.
And therefore it seems like the company.
Faced that, that visibility of a system level capability is great and very huge.
In other words the company also want to focus on this, capability
more than this more than this, what I'm trying to say is that.
It's not inappropriate way to pay, pay attention to this capabilities.
Even if the market is pretty
much concerned about this system-level capability only.
The company must also pay attention to it's basic
capability, and also process level capability at the same time.
If you ignore these two more, you know, fundamental level
capabilities, then even if you want to improve your system level capability.
It cannot be sustainable.
You cannot do that,
and such a relationship is depicted in this slide.
There is a basic level capability, based on mutual trust.
And some work ethics, and so on and so forth.
Only then you will be able to
have individual level technical skills process capabilities, right.
And only when you will be able to have group
level implementation skills, in other words a system level capability,.
Which will give you very, you know, high level of integrating ability.
Integrating all this knowledge, integrating all these
skills, and so on and so forth.
And then you will have high level of performance.
Okay.
My last point is that although by defining this as chain of capability, I
somehow implied that there might be some hierarchical relationship.
Yes, that's true there is hierarchical relationship.
But at the same time I have to say there is also feedback and you
know, [INAUDIBLE] in other words you know, sometimes even if
we do not have complete level trust and mutual understanding, you know,
compatible [INAUDIBLE] base capabilities impossible to
improve these process capability to certain error.
In other words although we can identify this kind of hierarchical correlationship.
I'm not saying that, that this is a rigid.
I don't want to do, I don't want to have a rigid relationship.
This is pretty much flexible.
So, sometimes you can back, go back and force.
And, sometimes, even if you have, you know, not [UNKNOWN]
it's possible for you to improve your process capability, and then, you.
Work with your basic capability or gain and then process capability as soon
as [UNKNOWN] so, by improving your process capability you will be able to
improve your system level capability, and after developing your system level
capability to a certain extent, you may go back to the, process capability as well.
So, although I assumed that there, there is some you know, trade-off relationship,
no, there is hierarchical correlationship, hierarchical relationship.
But my point is is that the hierarchical corelationship is not rigid.
That is you know pretty much flexible going back in force.
But nevertheless I would say that at a basic well fundamental level.
There might be some hierarchy correlationship
among these capabilities, and I say
that, that's the perspective, another perspective
to understand or to approach capability issues.
And that concept I define as Chain of Capability.
[BLANK_AUDIO]
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