Competitive manufacturing in a high cost environment

Abstract: Background: The movement of production to low cost countries has been a prominent trend during recent decades. The offshoring trend has primarily been cost motivated and has had a negative impact on domestic economic growth. Manufacturing firms operating in a high cost environment must strive to develop core capabilities to enhance competitiveness. In this study, the focus is on operations capabilities and improvement areas in a specific context (i.e. high cost environment). Purpose: The purpose of the study is to evaluate critical operations capabilities and improvement areas for competitive manufacturing in a high cost environment. Method: The research process is based on the evaluation of an existing framework of operations capabilities in a high cost environment. The study adopts a multiple case study approach in which three Swedish manufacturing firms are evaluated. The data collection was conducted through a quantitative part (i.e. questionnaire) and a qualitative part (i.e. workshop discussion). Findings: The findings revealed that 16 operations capabilities and ten improvement areas were considered critical in a high cost environment. Four critical capabilities (i.e. total cost, productivity, conformance and customization flexibility) are more prominent and appear in all three cases. Two critical improvement areas, total cost and dependability, are more prominent and have a higher occurrence. Implications: The practical implication of the study provides firms with an overview and better understanding of critical operations capabilities and potential improvement areas in a high cost environment. The theoretical implication of the study is that firm characteristics (e.g. size and position in the supply chain) influence the importance of each capability.