ProDesign International A/S

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ProDesign International A/S
Group A
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Problem statement - Questions Asked
Which difficulties have the Danish eyewear
manufacturer ProDesign International experienced
in implementing SCM?

• General Questions
• - Please state ProDesigns vision and mission.
• - Please briefly outline the competitive
  situation in the industry.
• SCM and implementation
• - Have you during the last few years actively
  attempted to change the relationship with your
  suppliers, and if so what has happened to
• Information sharing
• Horizontal Business Processes
• Number of suppliers
• Delivery time and quality of input
• Coordination and sharing of information with
  suppliers (electronically)
• - Did you encounter any problems in the
  process?
• - How did your suppliers react to the
  introduction of e.g. new processes at ProDesign?
• - Are you planning on intensifying the
  relations to your suppliers even more? (E.g.
  joint ventures, forward or backward integration)

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Assumptions and Delimitations

• Focus on the up-stream part of the value chain.
• The analysis is based on Vokurka and Lummus
  (2000) 7 recommended supply chain management
  issues.

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ProDesign International

• Danish design eyewear manufacturer.
• Established in 1989 but started a major
  turnaround in 1998 due to diminishing results.
• The new business concept increased focus on
  technical innovation, high product quality and
  design instead of a more price oriented view.

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Industry Overview

• Highly competitive industry (Lindberg, Bellinger,
  Eye Eye in Århus alone plus competitors like
  Luxottica internationally).
• ProDesign draws attention through groundbreaking
  design that challenges suppliers and fosters
  learning throughout the supply chain.

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Industry Overview

• Rising raw material prices in recent quarters
  margin pressure.
• Common to the Danish eyewear industry is a focus
  on innovation and revolutionary designs an
  appropriate strategy given the fact that
  competition in the eyewear market primarily is on
  design and customer service and less so on price.

7
ProDesigns Mission

• Ongoing collection development, to be designed
  in accordance with our interpretations of fashion
  trends and new production technology.

Source ProDesign International Business Partner
Concept
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Core Principles

• While retaining a competitive edge in a fast
  moving market, ProDesign remains true to the
  lifestyle values of Denmark where care and
  attention is always given to the individual, to
  suppliers and distributors, to ProDesigns own
  personnel, and to eyewear retailers worldwide.
• Value generation at each step of the value chain
  redesign or abandonment if necessary.

Suppliers (1st 2nd tier)
ProDesign Denmark
End User
Eyewear Retailers
Source ProDesign International Business Partner
Concept
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Core Principles- Supply Chain Strategy -

• Making highly innovative products through
  strategic long-term relationships to suppliers
  securing high product quality and on time
  deliveries.

10
Turnaround

• Poor performance in late 90s Hiring of
  Mogens Frederiksen (former Red//Green CEO) in 99
  Progress through innovation, groundbreaking
  design and tight financial control.

11
Turnaround

• Change of strategy from dispersed supplier
  relationships to closer-knit win-win
  relationships characterized by sharing through
  trust on time delivery higher quality
  greater customer satisfaction.
• Implementation of new administrative data system
  in 2000 reluctance to change limited due to
  favorable demographic composition plus the fact
  that ProDesign is an innovative company by nature.

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Orientation Towards ERP

• Introduced new software package in 2006 (Visma)
• Integration of the entire value chain.

Value-Network
Enterprise
Departmental
ProDesigns current position

• 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.

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Channel Design
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The Design Process
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Implementation Issues

• In order to achieve supply chain excellence, the
  company must be willing to change the way it does
  business.
• It is important that SCM issues are addressed at
  all organizations along the horizontal process.

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Vokurka and Lummus

• In order to implement supply chain management
  successfully Vokurka and Lummus (2000) emphasize
  seven implementation issues that a company should
  focus on.
• The difficulties of ProDesigns SCM
  implementation process will be considered in
  reference to these 7 management issues.

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Implementation Process and Issues

• Openly share information with suppliers
• Mainly through the design phase AutoCAD is used
  as a standard software package throughout the
  industry.
• The main problem that occurred was that some of
  the suppliers werent in the possession of
  videoconference equipment but made the
  investments (DKK 100.000) on ProDesigns request.
• Supplier review of sketch drawings followed by
  e-mail feedback or videoconference.
• Videoconference meetings every 2nd week.
• Discussion of urgent issues.

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Implementation Process and Issues

• Creation of horizontal business processes
• The turnaround affected most horizontal business
  processes.
• Lack of data compatibility New vs. old system.
  
• The new system (2000) improved
• Internal processes improved through common
  platform.
• Data management.
• The opportunity to pursue major goals.
• On-time delivery and higher quality products.

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Implementation Process and Issues

• Rely on a smaller number of outside suppliers
• Major purposes of ProDesigns turnaround were to
  bring down the number of suppliers in order to
  build a closer relationship through the set-up of
  long-term partnerships.
• The suppliers idiosyncratic (asset specific)
  investments in manufacturing tools underline a
  more committed and long-term oriented
  relationship.
• The long-term relationship serves as basis for
  shorter-term planning in regard to production
  capacity and the achievement of higher quality
  products and on-time deliveries.
• The reduction of suppliers did not imply any
  major problems due to short-term contracts but
  supplier screening lasted 4 years.

20
Implementation Process and Issues

• Increasing organizational and process flexibility
• The new software system (2000) increased the
  organizational and process flexibility - In
  regard to more standardized processes throughout
  the supply chain.
• Some employees had a negative view of the new
  technology, especially because it implied major
  changes to their job. In this 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).

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Implementation Process and Issues

• Coordinate processes across organizational
  boundaries
• Process collaborative planning, forecasting and
  replenishment takes place.
• ProDesign maintains a gentleman agreement with
  its suppliers about flexible production capacity.
• Serves as a buffer against fluctuation in demand,
  and provides ProDesign with a competitive
  advantage in periods of high demand.
• Communication about forecasting etc. is limited
  to e-mail communication after first stock order
  is placed.

22
Implementation Process and Issues

• Empower employees to make process decisions
• Decision makers from the strategic as well as the
  tactical levels are involved in most of the
  decisions regarding the supplier network.
• Due to the size of ProDesign a relatively
  hierarchical structure is justified. It could be
  argued that top management should not get
  involved with tactical and operational issues
  delegation appears to be a forgotten virtue.
• Top management Strategic issues
• Middle management Tactical issues
• Employees Operational issues

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Implementation Process and Issues

• 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.

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Recommendations

• Implementation 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-procurement
• Enables electronic processing of stock orders and
  reduces transaction costs.
• Increased overview of inventories at ProDesign as
  well as suppliers.
• Empower employees
• Top management should be better at delegating
  responsibility.

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QA
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References

• Interview CEO Mogens Frederiksen
• Danish News paper Børsen, 20.06.2007, pp. 14
• Danish News paper Børsen, 08.09.1999, pp. 10
• Danish News paper Børsen, 23.07.2001, pp. 7
• The Role of Just-In-Time in Supply Chain
  Management, The International Journal of
  Logistics Management, Volume 11, Number 1, 2000,
  Vokurka, Robert J., Lummus, Rhonda R.
• ERP and Supply Chain Management, Madu, Christian
  N., Kuei, Chu-hua, 2004
• ProDesign Annual Reports 1999-2006