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Business process outsourcing, operational excellence and value- innovation The missing link defined for European office-furniture manufacturers Dr.ir.

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Presentation on theme: "Business process outsourcing, operational excellence and value- innovation The missing link defined for European office-furniture manufacturers Dr.ir."— Presentation transcript:

1 Business process outsourcing, operational excellence and value- innovation The missing link defined for European office-furniture manufacturers Dr.ir. Marcel van Assen

2 Facts and figures Berenschot –Largest, independent Dutch management consulting firm –Providing solutions for complex issues in the areas of strategy, management, policy and human resources –2004: 66 years of experience –425 employees –€ 60 million turnover Dr.ir. Marcel van Assen

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4 Agenda Situation of (global) manufacturing –and its impact on outsourcing from a Dutch perspective What to do with European manufacturing activities: Outsourcing? Know exactly why: –What is the impact of contemporary business models to enable value-innovation? –What is the possible performance improvement of operational excellence here? –How to become a world-class manufacturer there? Managerial implications

5 World production 2005 Expectation Europe Stagnation Asia Growth USA Latin America Small growth Other parts The competitive position of Western manufacturers (in general) is determined by:  Labor cost  Design, branding, marketing and alignment of demand changes  Economic climate  Position as the value-chain’s orchestrator  Differences in national and law and regulations (and maintenance thereof) Little growth of consumption Effects of depression/recession Displacement to low wage countries Stagnation

6 Magnitude and growth of displacement (outsourcing & off-shoring) Source: Industriebrief/Berenschot ©

7 84% of the Dutch firms have not been displacing primary activities, but increasingly more firms intent to do so. Source: Industriebrief/Berenschot ©

8 Companies that have been off-shoring are generally satisfied with the results (although, so they say) Very dissatisfied Very satisfied DissatisfiedSatisfied Not dissatisfied Nor satisfies Source: Industriebrief/Berenschot ©

9 However, in particular low-skilled labor is off-shored What type of activities are outsourced/off shored? Source: Industriebrief/Berenschot ©

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11 Worldwide trends into World Class Competitive Requirements The Right Products or Services Timeliness Quality and Customer Satisfaction VALUE

12 3 Operations Strategy Customer NeedsCorporate Strategy Operations Strategy Alignment Core Competencies Processes, Infrastructure, and Capabilities Decisions OUTSOURCING?

13 Sustainable competitive advantage from Western-Europe is (only) possible in value chains in which: 1.Innovation determines the value of ownership 2.Technology clusters flourish because of sufficient scale and quality 3.Process performance out-balance labor costs EmbryonicGrowingMatureAging Key value driver: performance Engineering, integrating, testing Low volume, much diversity Key value driver: cost down transfer of manufact. possible Standards set, higher volume Outsourcing, global supply networks R&D

14 Sustainable competitive advantage from Western-Europe is (only) possible in value chains in which: 1.Innovation determines the value of ownership 2.Technology clusters flourish because of sufficient scale and quality 3.Process performance out-balance labor costs EmbryonicGrowingMatureAging Key value driver: performance Engineering, integrating, testing Low volume, much diversity R&D Alliance with a low cost contract manufacturer abroad

15 Sustainable competitive advantage from Western-Europe is (only) possible in value chains in which: 1.Innovation determines the value of ownership 2.Technology clusters flourish because of sufficient scale and quality 3.Process performance out-balance labor costs EmbryonicGrowingMatureAging Key value driver: performance Engineering, integrating, testing Low volume, much diversity R&D Alliance with a low cost contract manufacturer abroad Alliance with knowledge institutes and high-tech partners

16 The relation between Value-innovation and Operational excellence Operational Excellence (operational improvements) Industrial management: Value-innovation (strategic renewal) III III IV efficiency effectiveness To be profitable NOW FUTURE OUTSOURCING

17 Operational Excellence in Western Europe can only be achieved by realistic companies (NOT by complacent companies:)

18 The realistic versus the complacent company Schroeder & Flynn, 2001: High-performance manufacturing The complacent company has no view of key strengths and weaknesses Is Inward looking Is unaware of best practice has random improvement programs -- no coherent improvement strategy has goals based on historical performance The realistic company understands own strengths and weaknesses looks outside for new knowledge and benchmarks performance Knows content of industry practice Has improvement strategy tailored to strengths and weaknesses Sets stretch goals based on world’s best

19 The five starting points for improvement Low High Low Practice Performance Improving World Class Laggards Failure to realize performance Performance without practice I II III IV

20 Improvement agendas for different starting points Low High Low Practice Performance Staying in front : value-innovation and developing tomorrow’s practice Overcome complacency: Generate corporate understanding of position Implementation and direction: Limited, coherent set of improvement initiatives Maintaining the momentum Selecting the vital few each year Starting point: Choosing from a wide range of things that must be done OUTSOURCING

21 Analysis of the value chain: develop and use industry- and firm specific roadmaps Trends and SWOT in the value chain –Social developments –Market- en economic developments –SWOT-analysis of the players in the chain: Strengths, Weaknesses, Opportunities and Threats Porter-analysis of the value chain from a manufacturing perspective Management dilemma’s in the value chain Demands on the value chain Distribution/relocation of tasks and roles in the value chain

22 Analysis of the value chain (an example from the CBM roadmap)

23 Position (role) of various players in the value chain Designers & engineers Retail chain / chain stores Purchasing comb Component Supplier Process Supplier (OEM) Manufacturers

24 Growth scenarios Specialized application manufacturer by advanced product innovation (product design and engineering) (OEM) Manufacturers Full service/concept manufacturer by means of value-innovation and contemporary business models Value-chain orchestrator by means of outsourcing and insourcing

25 The office of the future

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27 Full integration of systems, equipment and furniture –3D-video conferencing –Wireless workplaces –Digitalization & miniaturization (and related advanced technologies) –Light-projection & the creation of atmosphere and ambience The office becomes more and more a meeting place Furnishings and interiors –are adapted to create inspiring working environments –are reduced to the only necessity instead of fully tuned to office activities –are made ultimately flexible for time- and task varying needs

28 Growth scenarios (OEM) Manufacturers Threats by the entrance of high-tech electronics companies (possibly in joint ventures with direct competitors) Designers & engineers Contemporary business model – high-tech product design and contract manufacturing in a strategic alliance Process Supplier Component Supplier

29 Outsourcing (backwards innovation) versus Automation & value-innovation (product and process innovation) (OEM) Manufacturers Automation Process and product innovation Value-innovation Collaboration and alliances Digitization and miniaturization Automation Specialized technology (productivity) Outsourcing

30 Analyze en adopt alliance and collaboration scenarios in the value chain 1.One for all manufacturing site Cooperation with other home office manufacturers 2.Innovation scenario Close cooperation between manufacturer, designer, knowledge institute (partners from the same industry) 3.Brand & lifestyle alliance Cooperation with brands from outside the industry (e.g. Heineken) 4.Domotics scenario Cooperation with high-tech manufacturers (Steelcase & IBM) 5.SUV (common platforms & modularity) –Joint development of platforms, modules and standardization 6.Collaborated low cost scenario Home furniture manufacturers jointly start-up a low-cost manufacturing site together

31 The costs in the value chain Optimalization by (entering) new markets Enormous cost savings potential by outsourcing Redesign of the value chain 1. streamlining: (OE, value innovation and orchestration in Western Europe 2. Start-up in low wage countries like China High risk factor when supply chains are complex (network design) Forgotten profit potential? Knowledg e and process costs Overhead costs Labor costs Purchasin g costs

32 Excellence abroad – controlled start-up of purchasing, production and/or sales Value chain concept  Value chain model  Vision about product and supply in the long run  Orientation on possible scenarios  Finance and subsidy planning Verkenning en shortlist Choice of specific region Sales and/or production and/or … List possible partners Protect know-how and other rights Realistic business case Contracting Pilot project Choose contract partner Choose location and facilities Recruit management Pilot: Can and will it work? Verification of the supply chain Upscaling Installation of equipment Recruit and train personnel Increase production and sales Ramp-up supply chain Evaluation, next fase Working system Experiences workforce Performance in process Profitable operations New plans Process control Choice of the region: Location study, market study Sales and/or production: Purchasing search Shortlist of partners: partnersearch Protection of know-how en rights Realistic business case

33 World class excellence (Here and Abroad) Strategisc dialogue over value chains Activities Process Klant IIIIII Value-innovation in Western Europe Use of opportunities abroad

34 Conclusion and managerial implications Value-innovation can outweigh specific arguments to offshore/outsource The same holds for Operational Excellence here Outsourcing suits risk avoiding behavior

35 Tailor-made Experience For hands-on consultancy on outsourcing, value-innovation, and strategic roadmaps please contact me at : For action-research and knowledge-based mirroring and as a ‘sparring-partner’, please feel free to contact me at

36 Impact Professional Side by side Reliable Sound Knowledgeable Experienced Total solution Result-oriented Made to measure Effective Internally & externally Inspiring Involved Takes responsibility Berenschot: Recommendations with impact, inspiring and working on solutions together with the client

37 E-business Supply Chain Mgt. Corporate Strategy Marketing Performance Imp. Change Mgt. Quality Mgt. Reorganisations Production Org. Leadership & MD Concern Mgt. Communication Purchasing Financial Mgt. Corporate Finance Mergers & Acquisitions Project Mgt. Logistics Mgt. Telecom…. Knowledge of sector Expertise For example: CPG Tailor-made solutions through combining expertise and sector knowledge in multidisciplinary teams

38 Berenschot Turnover Private sector 42% Public sector 20% Hybrid organisation (social security, utilities, telecom, etc.) 18% Abroad20%

39 E-I Consulting Group BSI & Partners Kienbaum Consultants International Praxi Development Systems OrgaConsultants Berenschot Hypodomi E-I Consulting Group S.A. Impact Plus

40 Human Resources Public Sector Business Sector Aims to be the best management consulting firm in the Benelux for both clients and employees Provides recommendations with impact, inspires and works on solutions together with clients Binds employees through team spirit, professionalism and highly demanding assignments turnover 60 million € Over 400 employees Berenschot in business: Tailor-made experience

41 Consulting experience Line experience Sector knowledge & expertise Employees Research Information Documentation l Optimal service to a wide range of clients through broadly experienced consultants ERICSSON

42 Approach Result Client Assignment High-tech business in defence industry Dutch subsidiary of French multinational Defence industry New organisational structure Successful cultural change Improved operational performance Cost reduction Improved customer orientation of staff Implementation of performance measurement system Implementation of governance structure Improved relations with French parent company Integration into process of functional areas “Develop a suitable process for restructuring and change, which focuses on improving market position and operational excellence” Side-by-side design of a new organisation (business units and process-oriented operational units), followed by implementation Increased involvement of the organisation with regard to both business and cultural aspects Team of 15 people: Corporate Strategy Change Mgt. Operations Mgt. Service Mgt. Supply Chain Mgt. Reference case: Restructuring of a high-tech manufacturer

43 Approach Result Client Assignment Development of main organisational structure together with the Board of Directors, and detailed organisational structure together with upper level management Made an inventory of current activities together with subsidiaries Team of 15 people: Change Mgt. Logistics Strategy Reward Mgt. Large Dutch publishing house “Unravel the logistical activities of the various subsidiaries and establish a new distribution-logistics unit within two years” Publishers Establishment of the main organisational structure of the new distribution logistics unit Naming of the top tier of management Business plan for the new unit Implementation plan for further realisation Operational new unit Reference case: Restructuring of logistical activities for a publisher

44 Approach Results Client Assignment Provider of logistical services Medium-sized Dutch organisation Logistical Services Clear process descriptions Essential improvements by bringing forward the merger of physical and information flows Successful streamlining of process through an improved co-operation with customers (automatic data exchange) Rapid development and implementation of requisite ICT systems, enabling above improvements and making them visible “Develop and put into place a new organisational structure that will streamline not only the organisation, but also the service we provide” Develop and implement a blueprint for the new structure, together with the client, on the basis of a BPR study: - Define the standardised service package - Determine which activities should be carried out in-house and which should be outsourced - Standardise procedures Team: Reorganisation Supply Chain Mgt. Communications E-business Reference case: Streamlining the organisation of logistics service provider

45 Large Dutch brewery Breweries An independently operating supply chain unit, firmly embedded within the organisation, in the space of nine months Transparent processes, management, organisation and information flows that are understood by all (including the client) Successful SAP implementation Employees, customers and suppliers who know what they can expect as well as what is expected of them “Develop and put into place a central unit to handle the purchasing and logistics of promotional materials” Develop a central purchasing unit, in close co-operation with client:: - Determine mission and aims - Define Performance Indicators by means of customer interviews - Develop structure - Assess financial consequences - Formulate a business plan Implement the plan together with the client Team of 11: Strategy Purchasing Mgt. Communications Logistics IT Approach Results Client Assignment Reference case: Establishment of a new unit within a large brewery


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