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ProDesign International A/SProDesign International A/S
Group A
Problem statement - Questions AskedProblem statement - Questions Asked
1.1. General QuestionsGeneral Questions- - Please state ProDesign’s vision and mission.Please state ProDesign’s vision and mission.
- - Please briefly outline the competitive situation in the industry.Please briefly outline the competitive situation in the industry.
2.2. SCM and implementation SCM and implementation - - Have you during the last few years actively attempted to change the Have you during the last few years actively attempted to change the relationship relationship with your suppliers, and if so what has happened to:with your suppliers, and if so what has happened to:
1.1. Information sharingInformation sharing
2.2. Horizontal Business ProcessesHorizontal Business Processes
3.3. Number of suppliersNumber of suppliers
4.4. Delivery time and quality of inputDelivery time and quality of input
5.5. Coordination and sharing of information with suppliers (electronically)Coordination and sharing of information with suppliers (electronically)
- - Did you encounter any problems in the process?Did you encounter any problems in the process?
- - How did your suppliers react to the introduction of e.g. new processes at How did your suppliers react to the introduction of e.g. new processes at ProDesign?ProDesign?
- - Are you planning on intensifying the relations to your suppliers even Are you planning on intensifying the relations to your suppliers even more? (E.g. more? (E.g. joint ventures, forward or backward integration)joint ventures, forward or backward integration)
Which difficulties have the Danish eyewear manufacturer ProDesign International experienced in implementing SCM?
AssumptionsAssumptions and Delimitations and Delimitations
Focus on the up-stream part of the value chain.Focus on the up-stream part of the value chain.
The analysis is based on Vokurka and Lummus’ (2000) 7 The analysis is based on Vokurka and Lummus’ (2000) 7 recommended supply chain management issues. recommended supply chain management issues.
ProDesign InternationalProDesign International
Danish design eyewear manufacturer.Danish design eyewear manufacturer.
Established in 1989 but started a major Established in 1989 but started a major turnaround in 1998 due to diminishing turnaround in 1998 due to diminishing results.results.
The new business concept increased The new business concept increased focus on technical innovation, high product focus on technical innovation, high product quality and design instead of a more price quality and design instead of a more price oriented view.oriented view.
Industry OverviewIndustry Overview
Highly competitive Highly competitive industry (Lindberg, industry (Lindberg, Bellinger, Eye Eye in Bellinger, Eye Eye in Århus alone plus Århus alone plus competitors like Luxottica competitors like Luxottica internationally).internationally).ProDesign draws ProDesign draws attention through attention through groundbreaking design groundbreaking design that challenges suppliers that challenges suppliers and fosters learning and fosters learning throughout the supply throughout the supply chain.chain.
Industry Net Income
15,3
144
19 -0,635
774
-100
0
100
200
300
400
500
600
700
800
900
PD Lindberg Bellinger Eye Eye LuxotticaM
illio
ns D
KK
Industry OverviewIndustry Overview
Rising raw material prices in recent Rising raw material prices in recent quarters margin pressure.quarters margin pressure.
Common to the Danish eyewear industry Common to the Danish eyewear industry is a focus on innovation and revolutionary is a focus on innovation and revolutionary designs – an appropriate strategy given designs – an appropriate strategy given the fact that competition in the eyewear the fact that competition in the eyewear market primarily is on design and market primarily is on design and customer service and less so on price.customer service and less so on price.
ProDesign’s MissionProDesign’s Mission
””Ongoing collection development, to be Ongoing collection development, to be designed in accordance with our designed in accordance with our interpretations of fashion trends and new interpretations of fashion trends and new production technology.”production technology.”
Source: ProDesign International Business Partner Concept
Core PrinciplesCore Principles
““While retaining a competitive edge in a fast moving While retaining a competitive edge in a fast moving market, ProDesign remains true to the lifestyle market, ProDesign remains true to the lifestyle values of Denmark where care and attention is values of Denmark where care and attention is always given to the individual, to suppliers and always given to the individual, to suppliers and distributors, to ProDesign’s own personnel, and to distributors, to ProDesign’s own personnel, and to eyewear retailers worldwide.”eyewear retailers worldwide.”
Value generation at each step of the value chain – Value generation at each step of the value chain – redesign or abandonment if necessary.redesign or abandonment if necessary.
Suppliers(1st & 2nd tier)
ProDesignDenmark
End UserEyewearRetailers
Source: ProDesign International Business Partner Concept
Core PrinciplesCore Principles- - Supply Chain Strategy -Supply Chain Strategy -
Making highly innovative products through Making highly innovative products through strategic long-term relationships to suppliers strategic long-term relationships to suppliers securing high product quality and on time securing high product quality and on time deliveries. deliveries.
TurnaroundTurnaround
Poor performance in Poor performance in late ’90s Hiring of late ’90s Hiring of Mogens Frederiksen Mogens Frederiksen (former Red//Green (former Red//Green CEO) in ’99 CEO) in ’99 ”Progress through ”Progress through innovation, innovation, groundbreaking groundbreaking design and tight design and tight financial control.” financial control.”
Net Income, ProDesign
-8000-6000-4000-2000
02000400060008000
1000012000
1998 1999 2000 2001 2002 2003 2004 2005 2006
TurnaroundTurnaround
Change of strategy from dispersed supplier Change of strategy from dispersed supplier relationships to closer-knit win-win relationships relationships to closer-knit win-win relationships characterized by sharing through trust on characterized by sharing through trust on time delivery + higher quality greater time delivery + higher quality greater customer satisfaction.customer satisfaction.
Implementation of new administrative data Implementation of new administrative data system in 2000 – reluctance to change limited system in 2000 – reluctance to change limited due to favorable demographic composition plus due to favorable demographic composition plus the fact that ProDesign is an innovative the fact that ProDesign is an innovative company by nature.company by nature.
Orientation Towards ERPOrientation Towards ERP
Introduced new software package in 2006 (Visma)Introduced new software package in 2006 (Visma)– Integration of the entire value chain. Integration of the entire value chain.
• Departmental
Each department operates as an isolated department.
• Enterprise
Information is shared between departments throughout the enterprise.
•Value-Network
Information is shared throughout the entire supply chain.
Departmental Enterprise Value-Network
ProDesign’s current position
Channel DesignChannel Design
Second tier supplier
End user Optician ProDesign First tier supplier
ProDesign International A/S supply chain
Focus In
som
e ca
ses
Pro
Des
ign
dict
ates
fir
st ti
er
supp
lier
s w
hich
sec
ond
tier
sup
plie
rs to
use
in
orde
r to
ach
ieve
the
qual
ity
requ
este
d.
Pro
Des
ign
has
esta
blis
hed
long
term
str
ateg
ic
part
ners
hips
wit
h si
x su
ppli
ers
wit
h ea
ch o
f th
eir
area
of
spec
iali
zati
on.
The Design ProcessThe Design Process
Product ideas – Communication – Draughting – Evaluation – Prototypes – Tooling samples – First stock order
A n
ew id
ea is
bor
n at
Pro
Des
ign.
Ske
tch
draw
ings
are
mad
e an
d al
read
y at
this
poi
nt in
the
phas
e Pr
oDes
ign
know
s w
hich
on
e of
the
supp
liers
who
is a
ppro
pria
te f
or th
e jo
b.
ProD
esig
n of
fers
one
of
the
supp
liers
to ta
ke o
n th
e ta
sk –
9
out o
f 10
tim
es th
e su
pplie
r ag
rees
. If
not t
he p
roje
ct is
mos
tly
revi
ewed
or
drop
ped.
The
cop
yrig
hts
rem
ain
at P
roD
esig
n bu
t th
ere
is n
o sh
oppi
ng a
roun
d be
twee
n th
e su
pplie
rs.
The
sup
plie
r dr
aw th
e w
hole
pro
ject
. If
the
tech
nica
l par
ts a
re
com
plic
ated
and
unk
now
n th
ese
are
the
mai
n co
ncer
ns.
The
ent
ire
proj
ect i
s ev
alua
ted
in te
rms
of d
esig
n an
d pr
ofita
bilit
y.
Prot
otyp
es a
nd f
inal
adj
ustm
ents
are
mad
e ei
ther
in a
per
sona
l m
eetin
g or
via
vid
eo c
onfe
renc
e.
The
fin
al id
iosy
ncra
tic in
vest
men
ts a
re m
ade
by th
e su
pplie
r.
Too
ling
sam
ples
are
mad
e an
d th
e en
tire
prod
ucti
on li
ne is
set
up
.
ProD
esig
n pl
aces
the
firs
t ord
ers…
Implementation IssuesImplementation Issues
In order to achieve supply chain In order to achieve supply chain excellence, the company must be willing to excellence, the company must be willing to change the way it does business. change the way it does business.
It is important that SCM issues are It is important that SCM issues are addressed at all organizations along the addressed at all organizations along the horizontal process. horizontal process.
Vokurka and LummusVokurka and Lummus
In order to implement supply chain management In order to implement supply chain management successfully Vokurka and Lummus (2000) successfully Vokurka and Lummus (2000) emphasize seven implementation issues that a emphasize seven implementation issues that a company should focus on. company should focus on.
The difficulties of ProDesign’s SCM The difficulties of ProDesign’s SCM implementation process will be considered in implementation process will be considered in reference to these 7 management issues.reference to these 7 management issues.
Implementation Process and IssuesImplementation Process and Issues
1. Openly share information with suppliers – Mainly through the design phase – AutoCAD is used as a Mainly through the design phase – AutoCAD is used as a
standard software package throughout the industry. standard software package throughout the industry.
– The main problem that occurred was that some of the The main problem that occurred was that some of the suppliers weren’t in the possession of videoconference suppliers weren’t in the possession of videoconference equipment but made the investments (DKK 100.000) on equipment but made the investments (DKK 100.000) on ProDesign’s request.ProDesign’s request.
Supplier review of Supplier review of sketch drawings followedsketch drawings followed by e-mail feedback or by e-mail feedback or videoconference. videoconference. Videoconference meetings every 2nd week.Videoconference meetings every 2nd week.Discussion of urgent issues. Discussion of urgent issues.
Implementation Process and IssuesImplementation Process and Issues
2. Creation of horizontal business processes – The turnaround affected most horizontal business processes.The turnaround affected most horizontal business processes.
Lack of data compatibility – New vs. old system. Lack of data compatibility – New vs. old system.
– The new system (2000) improved: The new system (2000) improved: Internal processes improved through common platform. Internal processes improved through common platform. – Data management.Data management.
The opportunity to pursue major goals.The opportunity to pursue major goals.– On-time delivery and higher quality products. On-time delivery and higher quality products.
Implementation Process and IssuesImplementation Process and Issues
3. Rely on a smaller number of outside suppliers– Major purposes of ProDesign’s turnaround were to bring down Major purposes of ProDesign’s turnaround were to bring down
the number of suppliers in order to build a closer relationship the number of suppliers in order to build a closer relationship through the set-up of long-term partnerships.through the set-up of long-term partnerships.
– The supplier’s idiosyncratic (asset specific) investments in The supplier’s idiosyncratic (asset specific) investments in manufacturing tools underline a more committed and long-term manufacturing tools underline a more committed and long-term oriented relationship.oriented relationship.
– The long-term relationship serves as basis for shorter-term The long-term relationship serves as basis for shorter-term planning in regard to production capacity and the achievement planning in regard to production capacity and the achievement of higher quality products and on-time deliveries.of higher quality products and on-time deliveries.
– The reduction of suppliers did not imply any major problems The reduction of suppliers did not imply any major problems due to short-term contracts but supplier screening lasted 4 due to short-term contracts but supplier screening lasted 4 years.years.
Implementation Process and IssuesImplementation Process and Issues
4. Increasing organizational and process flexibility– The new software system (2000) increased the organizational The new software system (2000) increased the organizational
and process flexibility - In regard to more standardized and process flexibility - In regard to more standardized processes throughout the supply chain.processes throughout the supply chain.
– Some employees had a negative view of the new technology, Some employees had a negative view of the new technology, especially because it implied major changes to their job. In this especially because it implied major changes to their job. In this regard ProDesign must:regard ProDesign must:
Ensure that the employees is prepared for the implementation.
Provide training for employees at operational and tactical levels that focuses not just on how to use the software but also on how the software will make their job easier and more efficient (doing the things right).
Implementation Process and IssuesImplementation Process and Issues
5. Coordinate processes across organizational boundaries
– Process collaborative planning, forecasting and replenishment Process collaborative planning, forecasting and replenishment takes place.takes place.
ProDesign maintains a gentleman agreement with its suppliers about ProDesign maintains a gentleman agreement with its suppliers about flexible production capacity.flexible production capacity.– Serves as a buffer against fluctuation in demand, and provides Serves as a buffer against fluctuation in demand, and provides
ProDesign with a competitive advantage in periods of high demand.ProDesign with a competitive advantage in periods of high demand.
– Communication about forecasting etc. is limited to e-mail Communication about forecasting etc. is limited to e-mail communication after first stock order is placed.communication after first stock order is placed.
Implementation Process and IssuesImplementation Process and Issues
6. Empower employees to make process decisions– Decision makers from the strategic as well as the tactical Decision makers from the strategic as well as the tactical
levels are involved in most of the decisions regarding the levels are involved in most of the decisions regarding the supplier network.supplier network.
– Due to the size of ProDesign a relatively hierarchical structure Due to the size of ProDesign a relatively hierarchical structure is justified. It could be argued that top management should not is justified. It could be argued that top management should not get involved with tactical and operational issues – delegation get involved with tactical and operational issues – delegation appears to be a forgotten virtue.appears to be a forgotten virtue.
Top management: Strategic issuesTop management: Strategic issues
Middle management: Tactical issuesMiddle management: Tactical issues
Employees: Operational issuesEmployees: Operational issues
Implementation Process and IssuesImplementation Process and Issues
7. Make real-time decision support systems available– ProDesign has not managed to implement real-time decision
support systems. However, a real time support system may not be appropriate.
Impossible to convince every customer (optician) to share e.g. real-time replenishment information with the suppliers.
RecommendationsRecommendationsImplementation of a PLM software package
Integrating product information that may be housed in different software systems.Information available to decision makers on a real-time basis.
Better handling of on time deliveries.
Implementation of ERP software Integrating ERP would lead to increased efficiency in the supply chain preventing sub optimization. In addition:– Information will replace inventory– Coordination will replace functional silos– Win-win strategy will replace sub-optimization– Knowledge will replace condemnation
But the unpredictable nature of the industry poses certain difficulties to ERP implementation such as fashion trends.
E-procurementEnables electronic processing of stock orders and reduces transaction costs.Increased overview of inventories at ProDesign as well as suppliers.
Empower employeesTop management should be better at delegating responsibility.
Q&AQ&A
ReferencesReferences
Interview – CEO Mogens FrederiksenInterview – CEO Mogens FrederiksenDanish News paper Børsen, 20.06.2007, pp. 14Danish News paper Børsen, 20.06.2007, pp. 14Danish News paper Børsen, 08.09.1999, pp. 10Danish News paper Børsen, 08.09.1999, pp. 10Danish News paper Børsen, 23.07.2001, pp. 7Danish News paper Børsen, 23.07.2001, pp. 7The Role of Just-In-Time in Supply Chain The Role of Just-In-Time in Supply Chain Management, The International Journal of Management, The International Journal of Logistics Management, Volume 11, Number 1, Logistics Management, Volume 11, Number 1, 2000, Vokurka, Robert J., Lummus, Rhonda R.2000, Vokurka, Robert J., Lummus, Rhonda R.ERP and Supply Chain Management, Madu, ERP and Supply Chain Management, Madu, Christian N., Kuei, Chu-hua, 2004Christian N., Kuei, Chu-hua, 2004ProDesign Annual Reports 1999-2006ProDesign Annual Reports 1999-2006
