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Manufacturing capabilities: expendable commodities or catalysts for effective supply chain management
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Industrial Economics and Management (Div.).
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Many large companies have for a long time been very successful in their industries by combining leading edge R&D and marketing with strong internal manufacturing capabilities. An alternative model is now getting increased attention, where R&D and marketing is conducted internally and manufacturing performed by outsourcing partners. This development is partly due to divergent views on the strategic role of manufacturing capabilities: expendable commodities that can be purchased from a low-cost provider versus resources essential for sustaining long-term competitive advantage. Although assessments of the strategic role of manufacturing capabilities have been performed previously, recent supply chain trends such as globalisation and fragmentation mean that they may no longer be relevant. The purpose of the thesis is to assess the strategic role of manufacturing capabilities for a product-owning firm, by focusing on what impact its internal manufacturing capabilities have on the effectiveness of the supply chain.

Two methods have been used for the research: survey and case study. The survey is representative for the entire Swedish manufacturing sector, whereas the case studies are to some extent industry- or company-specific. Two companies were researched: one in the telecom equipment sector, the other a supplier to multiple sectors, including the telecom equipment sector. The results of the research have been presented in five scientific articles that are also found in the appendices.

The thesis argues that in order to evaluate the strategic role of manufacturing capabilities, it is important to look at how they contribute to the focal firm’s competitive priorities. When the technology is new, the competitive priority tends to be innovation, and the role of manufacturing capabilities is to facilitate more efficient NPD. When products mature, low cost becomes the dominant competitive priority, and the role of manufacturing capabilities is to facilitate a high operational efficiency of the supply chain. Although the potential role of manufacturing capabilities is dependent on the firms’ competitive priorities, just possessing manufacturing capabilities will not automatically translate into high performance. Instead, the performance outcome is dependent on both the level of manufacturing capabilities and, even more importantly, how they are leveraged through the integration of customers, suppliers and the product development department.

This thesis contributes to the discourse on the role of manufacturing in two ways. First, the thesis investigates how competitive priorities impact the role of manufacturing capabilities in the supply chain. Second, this thesis explores how manufacturing capabilities influence the efficiency of integration. The main theoretical contribution is to develop and test the concept of manufacturing absorptive capacity within the context of manufacturing capabilities’ role in the supply chain. The thesis concludes that manufacturing capabilities are almost inevitably seen as strategic because they help firms integrate external sources more efficiently, thereby achieving performance improvement in terms of both operational efficiency and efficient product development. When the performance improvement corresponds with the prevailing competitive priority, the supply chain can be said to be effective. Manufacturing capabilities can thus act as a catalyst for effective supply chain management.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2012. , viii, 73 p.
Series
Trita-IEO, ISSN 1100-7982 ; 2011:08
National Category
Business Administration
Identifiers
URN: urn:nbn:se:kth:diva-58826ISBN: 978-91-7501-212-4OAI: oai:DiVA.org:kth-58826DiVA: diva2:474292
Public defence
2012-01-20, Sal F3, Entréplan, Lindstedtsvägen 26, KTH, Stockholm, 10:00 (English)
Opponent
Supervisors
Note
QC 20120109Available from: 2012-01-09 Created: 2012-01-09 Last updated: 2012-01-30Bibliographically approved
List of papers
1. Internal and external integration and its effect on manufacturing firms´ competitiveness
Open this publication in new window or tab >>Internal and external integration and its effect on manufacturing firms´ competitiveness
2006 (English)In: Proceedings of EurOMA Conference 2006 in Glasgow, June, 2006, and at the 7th International CINet Conference in Lucca, Italy, 10-12 September, 2006, 2006Conference paper (Refereed)
Abstract [en]

Many authors highlight the importance of looking outside the focal firm for sources of innovation and future revenue. The failure to do so, can render the company less competitive in the short term, and prove lethal in case of disruptive shift in customer preferences or technology. The sources of innovation can also reside within the firm, and it is important to ensure frequent communication between different departments in order to harness effectively the firms’ inherent innovative capabilities. However, for integration to be desirable, the benefits from integrating various sources should support the overall objective of the firm. These benefits should be lower cost, for the price sensitive firms, and higher level of innovation for more innovative firms. Based on a large-scale survey, this paper will explore whether such integration does bring the intended benefits, and also if there is any other effect on several other performance indicators.

Keyword
Survey, Internal and External Integration, Manufacturing
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-7388 (URN)
Note
QC 20101122Available from: 2007-07-24 Created: 2007-07-24 Last updated: 2012-01-09Bibliographically approved
2. Beyond Fisher’s Product-Supply Chain Matrix: Illustrating the Actual Impact of Technological Maturity on Supply Chain Design
Open this publication in new window or tab >>Beyond Fisher’s Product-Supply Chain Matrix: Illustrating the Actual Impact of Technological Maturity on Supply Chain Design
(English)In: International Journal of Logistics Systems and ManagementArticle in journal (Other academic) Accepted
Abstract [en]

The literature suggests that supply chains should be designed based on product characteristics, with particular focus on technological maturity and its effect on the predictability of demand. However, other factors influence the predictability of demand and technological maturity has effects that go beyond demand forecasts. This paper discusses the actual challenges of designing a supply chain and, based on a single case study, illustrates how a leading technology-based company solves these problems. The study found that although technological maturity drives a change towards a more efficient supply chain, a partially separate supply chain had to be maintained for unpredictable demand.

Keyword
supply chain, management, technological maturity, demand predictability, responsive, cost-efficient, Ericsson
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-58801 (URN)
Note
QS 2012Available from: 2012-01-09 Created: 2012-01-09 Last updated: 2012-01-09Bibliographically approved
3. Manufacturing competence: a key to successful supplier integration
Open this publication in new window or tab >>Manufacturing competence: a key to successful supplier integration
2009 (English)In: International Journal of Manufacturing Technology and Management (IJMTM), ISSN 1368-2148, Vol. 16, no 3, 283-299 p.Article in journal (Refereed) Published
Abstract [en]

Extensive involvement of suppliers in new product development and manufacturing development has often been associated with superior performance. Some authors have also alleged that companies need comprehensive internal competencies, or absorptive capacity, in order to fully benefit from external expertise. This paper analyses this relationship on an operational level in manufacturing companies. Based on a large-scale survey it is shown that companies with greater internal manufacturing competencies gain significantly from supplier involvement in terms of most performance indicators, whereas those with lesser internal competencies have little to gain from such external cooperation.

Keyword
Absorptive capacity, Manufacturing, Supplier involvement
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-7387 (URN)10.1504/IJMTM.2009.022437 (DOI)
Note
Uppdaterad från accepted till published(20101122) QC 20101122Available from: 2007-07-24 Created: 2007-07-24 Last updated: 2012-01-09Bibliographically approved
4. Do Customers Improve New Product Development Efficiency?: Revealing the Impact of Manufacturing-Based Absorptive Capacity
Open this publication in new window or tab >>Do Customers Improve New Product Development Efficiency?: Revealing the Impact of Manufacturing-Based Absorptive Capacity
(English)Article in journal (Other academic) In press
Abstract [en]

In order to collaborate with customers in new product development efficiently, companies need to maintain some inherent competence that allows them to both understand the external party’s processes and absorb external knowledge. The aim of this study was to operationalise absorptive capacity for manufacturing and examine its impact on new product development efficiency. A large scale survey was sent out to Swedish manufacturing companies and the data was analysed using hierarchical regression. The results show that it is not manufacturing competence per se that increases new product development (NPD) efficiency, but rather how the competence is leveraged through various integration mechanisms. The results indicate that the indirect ability to improve NPD efficiency should also be taken into account when a firm is deciding whether to invest in manufacturing or not.

Keyword
customer integration, absorptive capacity, manufacturing, new product development
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-58802 (URN)
Note
QS 2012Available from: 2012-01-09 Created: 2012-01-09 Last updated: 2012-01-09Bibliographically approved
5. Manufacturing competence and external integration: absorptive capacity in a first-tier supplier
Open this publication in new window or tab >>Manufacturing competence and external integration: absorptive capacity in a first-tier supplier
2007 (English)In: 14th International Annual EurOMA Conference, Ankara, Turkey, June 17-20, 2007, 2007Conference paper (Refereed)
Abstract [en]

There has been increasing interest in understanding the mechanisms for successful collaboration and learning in the supply chain. In a widely quoted paper, Cohen and Levinthal (1990) alleged that firms need to have absorptive capacity in order to benefit from external sources. The purpose of this paper is to extend the arguments to manufacturing, by illustrating how the dimensions of absorptive capacity are equally relevant in a manufacturing setting that includes customer and supplier integration in production processes. Based on a pilot case study of a Swedish firsttier supplier, it is shown that many of the fairly common manufacturing-related practices have an impact on the absorptive capacity of a small firm. This implies that manufacturing investment strategies not only influence the operations of the firm but also determine how effectively it can communicate with its external environment.

Keyword
absorptive capacity, manufacturing competence, external integration
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:kth:diva-7389 (URN)
Conference
14th International Annual EurOMA Conference, Ankara, Turkey, June 17-20, 2007
Note
QC 20101122Available from: 2007-07-24 Created: 2007-07-24 Last updated: 2012-01-09Bibliographically approved

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