Operations Improvement — The Usual Reason

The same efficiency driver can also apply to downstream distribution. Companies in the food industry, for example, market products with a lot of distribution costs to end-users. Such efforts often seek to reduce so-called market mediation costs described in Chapter 6.4. 

The second motivator for partnerships, and a deeper strategic one, is the need to focus on core competencies. That is, We do what we do best partners do the rest. Assumptions about core competency underlie many decisions about partnerships. A decision to perform or not perform an activity or produce or not produce some component of a good or service is a strategic determination. It entails deciding which capabilities to retain and cultivate and finding the right partner to do the things that we will not do. Decisions in this area also affect the type of supply chain needed 

Handbook of Supply Chain Management, Second Edition 

FIGURE 17.3 Competencies the roots of competitiveness. (Reprinted with permission of Harvard Business Review. Exhibit from The Core Competency of the Corporation by Gary Hamel and C.K. Prahalad, May-June, 1990. Copyright 1990 by the President and Fellows of Harvard College all rights reserved.) 

The authors illustrate the point with Canon, a manufacturer of a range of high-technology products. Canon has three core competencies in (1) precision mechanics, (2) fine optics, and (3) microelectronics. Like Honda, Canon applies combinations of these to a score of products ranging from cameras to copiers. 

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