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INDENTIFYING CORE COMPETENCIESOF GLASS INSULATION AND SEALING PRODUCTION

Ivica Vea

Joe Bali

Franci u

Toni Grubi

Prof.dr.sc. I. Vea, University of Split, FESB, R. Bokovia bb, 21000 Split

Prof.dr.sc. J. Bali, University of Maribor, Faculty of Mechanical Engineering,

Smetanova 17, 2000 Maribor, SloveniaProf.dr.sc. F. u, University of Maribor, Faculty of Mechanical Engineering,

Smetanova 17, 2000 Maribor, Slovenia

T. Grubi, University of Split, FESB, R. Bokovia bb, 21000 Split

Key words: cooperation, core competencies, glass insulation and sealing production

ABSTRACT

Nowadays, most manufacturing processes are not carried out by single enterprise.

Rather, organizations feel the need to focus on their core competencies and join efforts

with others, in order to fulfil the requirements of new products or services demanded by

the global market. Business process outsourcing (BPO) involves looking closely at the

processes that compose the business and its functional units, and then working with

service providers to outsource these functions.

In a cooperative networked organization, every enterprise is just a node that adds

some value to the process; namely, a step in the manufacturing / supply chain.

Furthermore, manufacturing companies increasingly encompass what has typically been

regarded as the domain of the service sector. They try to establish long-term relationshipwith their customers in order to service their needs around manufactured product. For this

reason, the area of virtual organisation and industrial virtual enterprises is attracting

growing interest in terms of research and development, and implementation approaches

for new business practices.

This paper proposes a method allowing a concise identification and evaluation of

cores competencies, which was applied on the production of glass insulation and sealing

materials.

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2 Ivica Vea, Joe Bali, Franci u, Toni Grubi

1. INTRODUCTION

Non-flexible production structures can no longer survive on the market, since they

can react to changes only with a big time lag, or, in other words, they cannot act - they

can only react. It is necessary to restructure the existing factories that are still mainlyorganized according to Taylor principle. One of possible restructuring actions is the

introduction of new cooperation forms that are based on regional integration (Supply

Chain Management, network factory etc.).

The fundamental criterion of network factory design is concentration on core

competencies. Core competencies are here determined in three steps, which are

described iteratively:

1. Identifying of the core vision of an organization. The basic idea was the creation of a

virtual factory that would connect the factories of the region in order to increase their

market competence.2. Identifying core competencies. This step determines which products/ production/

services are important for further development of a factory, i.e. which ones could have

a good position on market. In order to identify core competencies of production and

service functions, the portfolio matrix is commonly used. Measurement for strategic

differentiation is performed in separate departments whose economic efficiency is

worse than the efficiency of outside deliverers and who do not represent a long term

development potential of an enterprise. It is difficult to determine the most competitive

processes because of multiple factors of influence. The project team should define

core competencies, and steps for further optimization of structures and resources. On

the other hand, in the field where an enterprise has no competence at all it is

necessary to find deliverers and a strategy for displacement of production/services to

other locations.

3. Optimization of core competencies. It is not sufficient only to identify core

competencies, their dynamic management must also be provided in order to provide

further development of their potentials and competencies. The competencies to be

optimized are those that provide long-term market competitiveness.

The method for identification and evaluation of core competencies is introduced in

the next section followed by the applied example.

2. THE EXPLOITATION OF COMPETENCIES WITHIN THE FRAMEWORK FOR

GLOBAL VIRTUAL BUSINES

According to (Molina & Bremer, 1997), within the Framework for Global Virtual

Business, Virtual Enterprise Brokers (VEB) will be looking for core competencies in a

Virtual Industry Cluster (VIC) to:

- Make a product;

- Perform a or a set of business processes to deliver a product;

- Apply or have access to a technology to make a product;

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Identifying Core Competencies of Glass Insulation and Sealing Production3

The VIC should respond to these requirements or tasks based on its

constituent skills, which should be represented as:

- What type of products it can do;

-

What business processes it can perform;Following this approach, the required competencies are the required competencies are

the capability of matching and fulfilling the tasks provided by the VEB (Molina & Bremer,

1997). Products, business processes and technologies can be thus understood as core

competencies' building blocks, or constituent skills.

An issue that encourages this approach by core competencies' constituent skills

is that it deals with easily explicit able components, which are well known products,

processes and technologies. Moreover, at this level (building blocks), they will be

integrated in Virtual Enterprises by the VEB.

Before showing the method for identification and evaluation of constituent skills, it

is important to clearly what each one product, process and technology means:

- Product: it can be understood as a result of a single or more processes. Not

necessarily, a product must have physical or material characteristics; it can be a

document or software. In this work, a product will be considered that resulting from

manufacturing processes. The representation will be based on project SFB 361

(Eversheim et al., 1996).

- Process: Garvin (Garvin,1995) classifies processes as management processes,

business processes and work processes. In this work, process is always related to

business process. Rozenfeld (Rozenfeld,1995) defines a business process as

phenomena that occur inside the company. It encompasses a set of activities, whichare associated with the information handled by the company, using its resources and

organization. A business process constitutes a coesa unity and must focus on a

type of business, with well-defined market/customer and suppliers. Examples of

business process are product development, order fulfillment and service.

- Technology: the Encyclopaedia Britannica (2000) defines as technology as the

deployment of scientific knowledge for practical issues of human life, or applied for

change and manipulation to the human environment. The Merrian-Webster (2000)

dictionary defines technology as the practical deployment of scientific knowledge in a

specific area, or a specific way to accomplish a task by using processes, methods orknowledge. Moreover, a classification proposed by Teerhag (Teerhag et. al., 1996)

will be adopted. These classification sub-divides technologies as:o Human skills: these technologies encompass personal skills for technical and

material tasks, and are related to the competitive and profitable use of specifics

tools to accomplish those tasks;o Organizational practices; they represent the practices and methods adopted by

the company's organization of performing its business process;o Resources: these are all that the physical resources used by company, like

machine tools, computers, LAN's facilities and so forth.

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However, the breakdown shown above does not provide the necessary support to

identify and evaluate technologies as constituent skills of core competencies, specifically

the human skills and the organizational practices, which may be considered as a part of

the company's knowledge.In accordance with (Nonaka & Takeuchi, 1997), the knowledge a company has

can be classified as explicit or tacit ones. Explicit knowledge are those that can be

formalized as text, databases, and so forth, while tacit knowledge are considered inherent

to a person, acquired through time and experimentation.

Rozenfeld (Rozenfeld, 1995) proposed a typology for representing explicit

knowledge, where are considered as being:

- Philosophies/Concepts: they are used to create theoretical and generic basis, e.g.

Activity Based Costing (ABC) of Project Management;

- Techniques/Methods: they are structural in steps or related to something more

specific, e.g. Computed Aided Design (CAD) or Quality Function Deployment (QFD);

- Tools/Systems; they are generally related to commercial solutions, e.g. Product Data

Management (PDM) or Electronic Document Management (EDM).

Thus the company's human skills or organizational practices can be classified as

explicit knowledge, in a lower level as philosophies/concepts, methods/techniques or

tools/systems.

2.1. Products as a Constituent Skill

The method consists of two spreadsheets, the Products Internal Evaluation

Spreadsheet (PIES) and the Qualitative Evaluation Spreadsheet (QEPS). The PIES

identifies the products and aims to provide general information about them. This

information consists of:

- Manufacturing typology 1: MTS, MTO, ATO or ETO product;

- Manufacturing typology 2: discrete or continuous process product;

- Classification: according to SFB 361 (Eversheim et al., 1996), it can be a final product,

a module, component or a single piece;

- Participation on company's income: percentage of income the referred product

provides the company;

- Market-share;- Specific market growth;

- Life-cycle phase: introduction, growing, maturity and declining.

The criteria market-share, specific market growth and life cycle phase provide

balanced weights, which will be used by the next spreadsheet. These weights are from 1

(the lowest) to 4 (the highest). The second spreadsheet, QEP, provides qualitative marks

for internal and customer criteria, which are:

- Capability in gaining new customers;

- Capability in gaining new order;

- Customer's quality perception;

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- Possibility to be recycled/retrofitted;

- Level of technological innovation.

These criteria are judged according to marks from 1 (lowest value) to 5 (highest

value). After collecting data for all the products available in company, a score is done bysumming the marks for all the criteria, then multiplying this sum by the weights given by

PIES. A second sum is done, taking into account all the scored sums, thus an ABC curve

is drawn.

Those products that contribute with until 50% percent of the final sum, these will

be considered the company core products. However, it is necessary to have workshops

within the company, in order to validate the obtained results.

2.2. Business processes as a Constituent Skill

This method is based on the work performed by (Teerhag et al., 1996). In order toallow a uniform and equal analysis of different companies' business processes, taxonomy

was adopted, and it is that from ENAPS (European Network for Advanced Performance

Studies). This taxonomy encompasses the following macro processes:

- Product Development,

- Obtaining the Customer Commitment,

- Order Fulfillment,

- Service.

The processes are evaluated taking into account both qualitative and quantitative

criteria, in internal and external perspectives. Each process and its respective sub-

processes or activity, a balancing weight must be given, from 1 (the lowest) to 3 (the

highest).

The criterion for considering a process as a core process, both perspective values

(internal and external) must be over 50%. As the same for products, the results must be

validated in workshops within the company.

2.3. Technologies as Constituent Skill

The evaluation of technologies may need of lists with examples that follow the

classification explained in the previous sections, for human skills and organizational

practices. As so, the company can correctly provide the necessary information.

About the resources as technologies, it is assumed that the most important

contribution a company, in terms of physical resources, may provide for VIC's and Virtual

Enterprises are its machine tools and other devices, directly linked with production. Then

only manufacturing processes (like grinding, turning or drilling) will be taken into account

by this method.

The methods consist of evaluating the evolution stage for each technology, within

the enterprise and frond to the market, and the technology's necessity for

competitiveness. Gallon (Gallon et al., 1995), define each one of these criteria as:

- Absolute strength: related to how a technology is internally developed;

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- Relative strength: related to how, front to main competitors, a technology is developed;

- Criticality: related to how a technology has direct influence on competitiveness.

Each one of these criteria are marked from 1 (the lowest mark) to 5 (the highest

mark) (Table 1). After collecting all the data, three different portfolio graphics are plotted(Absolute Strength x Relative Strength, Absolute Strength x Criticality, Relative Strength x

Criticality).

Table 1 Marks for the technologies' evaluation criteria

Marks Absolute Strength Relative Strength Criticality

5 Highly refined, with

limited scope for

improvements

Total leadership Essential for competitive

advantage

4 Well developed, with

moderated scope for

improvements

Equivalent to the best

practice, without

leadership

Direct and significant

effect on competitiveness

3 Partially developed,

with significant scope

for improvements

Within the industry

average

Important for

competitiveness, but not

directly

2 Initial development

stage

Substantially worse the

industry average

Quite irrelevant for

competitiveness, but

worth for pontual benefits

1 Real infancy, with high

scope for development

Sub-developed if

compared with the

industry average

Almost no impact on

competitiveness

As a criterion for evaluation, a technology will be a core technology if it is present

in at least two portfolios, classified with marks higher than the average (value: 3). As the

same for products and business processes, it needs to be validated within the company.

3. APPLICATION OF A METHOD FOR IDENTIFYING CORE COMPETENCIES FOR

GLASS INSULATION AND SEALING PRODUCTION

For determining the core competencies of an enterprise X: production programme,

enterprise's value stream flow chart and basic technological resources had to be defined.

Following core competencies were determined based on the analysis:

Glass plaits production,

Production of graphite and tephlonic plaits,

Design and production of industrial compensators,

Fibre glass production,

Production of glass linen and glass ribbons,

Production of PTFE products; Sealing production.

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The procedure is conducted in three steps:

1. In the first step of MIECC method (a Method for Identifying and Evaluating Core

Competencies) application the production program was analyzed. Determined criterion

which suggests that a product should satisfy with the minimal level of value coefficientof 0.5, following products did not satisfy:

Fibre glass production,

Production of PTFE products; Sealing production.

Design and production of industrial compensators is on the margin of acceptance

but since the product is crucial for the enterprise in finance terms it was clear that the

enterprise would continue with the policy of its production.

2. Method for evaluation of basic processes is applied on rest of the competencies. From

Figure 1 it is obvious that only the impregnation process does not belong in domain of

basic process so it could be outsourced to external supplier. Current domestic

characteristics are such that it is better to find the supplier abroad.

Figure 1. Graphical presentation of basic processes criterion satisfaction

knitting

compensator sewing

weaving

impregnation with graphite or tephlonic dispersion

Outsourcing

Basicprocessescompetenci

es

Internalperspective

External perspective

50%

100%

50% 100%

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Survived core competencies according to the method's outcomes are:

- Fibre glass production,

- Design and production of industrial compensators,

-

Production of glass linen and glass ribbons.3. In the step three respective technologies for the production of chosen products were

analyzed:

Weaving technology,

Knitting technology,

Sewing technology.

Technology resources that are used by the identified basic processes

competencies are satisfactory according to method's criterions.

After the suppliers for other processes had been determined the enterprise should

give up of all of the technologies involved in those processes.

By doing so the enterprise would become more competitive because it should then

only be focused on rationalization of basic processes competencies by which could strive

to achieve lower prices.

4. CONCLUSION

Traditionally lot of enterprises have looked on its existence isolated of others even

with desire to compete with itself and so ensuring its own existence. Darwin's law of

survival of the fittest could almost be applied. But this approach could also sound as self-

destructive if an enterprise is not willing to cooperate with other involved business entitiesas integrated competitive subject. As opposed to this idea is idea of integrated supply

chain.

Number of enterprises that are focusing on their core business in other words

doing what they are best in or doing only those things in which they achieve and sustain

competitiveness is growing larger every day. Everything else that could not be

characterized as core business is outsourced to suppliers, i.e. it is produced out side of

the enterprise.

To accept that philosophy firstly it is needed to identify core competencies. In this

paper the application of MIECC method Method for Identifying and Evaluating Core

Competencies on glass insulation and sealing production is presented. The outcomes

from the method influenced the enterprise in such a way that it became dynamic

enterprise focused on ensuring its competitiveness.The MIECC method is highly flexible

because it could be used on any enterprise belonging to any industry sector and also

because the results are quantitative and rapidly evaluated. After the method had been

applied a new supplier net, with the characteristics of virtual enterprise, is set. Each

enterprise situated in this structure is involved in those activities of a particular project,

which represent their core competencies.By exploiting mutual cooperation between the

involved enterprises it is possible to satisfy the customer regarding a product quality, time

and price features.

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To become competitive it is no longer enough to overcome the rivalry between two

enterprises the term should be taken into a higher level. Market competition is about

rivalry between two cooperative networks in which each business entity is striving to

rationalize its core competencies with the overall aim of achieving and sustaining superiornetwork competitive position. As Hemingway would say no enterprise is an island.

5. LITERATURE

1. L. M. Camarinha-Matos; H. Afsarmanesh; H.-H. Erbe: Advances in Networked

Enterprises, Kluwer Academic Publishers, Boston, London, 2000.

2. Encyclopaedia Britannica, http://www.eb.com. 20.01.2000.

3. W. Eversheim; A. Graessler; A. Koelscheid: Information Management within a

Concurrent Engineering Environment, Report, WZL-RWTH, Aachen, 1996.

4. M. R. Gallon; H. M. Stillman; D. Coates: Putting Core Competency Thinking intoPractice. Research Technology Management, Vol. 5-6, 1995.

5. D. A. Garvin: Leveraging Process for Strategic Advantage, Harvard Business Review,

1995.

6. Merrian-Webster Dictionary, http://www.merrian-webster.com. 210.01.2000.

7. A. G. Molina; C. F. Bremer: An Information Model to Represent the Core

Competencies of Virtual Industry Cluster. WZL-RWTH, Aachen, 1997

8. I. Nonaka; H. Takeuchi: Criacao de conhecimento na empresa. Campus, Rio de

Janeiro, 1997.

9. H. Rozenfeld: Reflexes sobre a manufactura intergrada por computador. Escola deEngenharia de Sao Carlos Universidade de Sao Paolo, 1995.

10. O. Teerhag; S. Dresse; W. Koelscheid; A. Nieder: Model for Transforming, Identifying

and Optimizing Core Process (MOTION), WZL-RWTH, Aachen, 1996.
http://www.eb.com/http://www.merrian-webster.com/http://www.eb.com/http://www.merrian-webster.com/

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