Consultancy Advice for Supply Network Design and Process and Service Design of Bang and Olufsen - Case Study Example

CONSULTANCY ADVICE FOR THE SUPPLY NETWORK DESIGN AND PROCESS & SERVICE DESIGN OF BANG & OLUFSEN Executive Summary This paper looks at the supply network design and innovation process design of Bang & Olufsen. It identifies that the use of retailers in the delivery of goods to customized order clients is inappropriate. It therefore recommends the direct delivery of customized orders to clients from Bang & Olufsens headquarters through a fast and trusted airlifting courier service. Also, it recommends the use of strong and reliable forecasting techniques to ensure that the demand for small and mass produced items are monitored in the various retail outlets around the world and shipments made at the right time to prevent shortages. The consultant also recommends the formation of a Design/Innovation Management unit in Bang & Olufsen to help in the integration of IdeaLab as a emergent as well as a primary/pure innovation unit. This way, IdeaLab can live above the conflicts and become a major player in Bang & Olufsen without going through too much conflicts. Supply Network Design There is the need for the design of a new supply network design. This new design and this new network must focus on customizing and supplying directly to the small niche of customers who account for over 70%. It should also focus on improving the shop design system for the large segment of customers who buy single items or in smaller quantities. Large/Customized Buyers The new supply network design must seek to always keep in touch with these customers and get an idea of what they want and prepare their positions to order the right type and volume of stocks to produce from these customers at a short notice. This can be done by using the customer relations management system to communicate regularly with the customers and find out their concerns. Once this kind of information can be ascertained, various units of the customization system can be mobilized to take the right steps even before orders are taken. Based on this forecast system, components can be ordered and delivered in anticipation of demand. In cases where the forecast show longer periods between orders, the plant in Koprivnice and on site should be programmed to be able to put the vital components together in the shortest period of five days so that they can be obtained just when they are needed. The Assembling department should maintain its production period of 1 day to ensure that all order details and quality functions are met so that the reputation of Bang & Olufsen remains intact. However, it is recommended that the use of retail outlets be eliminated from the process. It is ideal that the headquarters in Denmark maintains a direct link with these larger consumers and ship directly to them without using retail outlets. This will reduce the lead time between the consumers and the retail outlets for larger clients. It is also recommended that Bang & Olufsen uses a fast and reliable courier company that has a global reach for shipment of customized goods. An ideal courier company is one that uses airlines to move goods from one point to the other over all the continents. If this arrangement is in place, orders can be taken and assembled in one day and shipped upon arrival at the customer center. This will eliminate the one day waiting period at the customer center and the three days of transit to the retail outlets. This will save the customers a four-day period of waiting! In summary, the following supply network systems must be adopted for large buyers and customized orders: 1. Large orders should be directly sent to the global headquarters as soon as it is made anywhere in the world. 2. The assembling plant must always ensure that components for goods in demand are always in stock and there is a production cycle for that. 3. Shipping should be made directly from the headquarters to customized clients through the use of a global courier with a good reputation of delivery quickly. Smaller/Mass Produced Orders Although Bang & Olufsen head office will try to eliminate retail outlets from the supply chain for customized and larger orders, they should maintain them for smaller or mass produced orders. They must put in place a good forecasting system to understand the trend in demand for each product and at each season. Once this is done, they can inform the component manufacturers of the volumes of which parts to produce at different points in time. Demand from the various retail outlets should be monitored closely through the use of the existing IT systems and they should be re-stocked as soon as their stocks fall to a certain level. This should be done by relying on a good and cost-effective system for the transportation of goods. In this case, the use of demand forecasting can give room for the use of shipment and other transportation systems that might not be as expensive as the airliner. However, they should arrive on time and special concessions must be made when urgent orders are placed for the airlifting of orders to retail outlets around the world. Product & Service Design Process The conflict between IdeaLab and IdeaLand is very sensitive due to the times the company is operating in. It is therefore necessary for management to come up with a plan that will ensure that the values, systems and reputation built by the company over the past 80 years are honored whilst at the same time, modern technological requirements are honored. In this case, management will need to re-structure its design and innovation management system. First of all, it is necessary for the management of Bang & Olufsen to divide its innovation system into two parts: 1. Situational Innovation unit and 2. Pure/Primary Innovation unit The situational innovation unit will be responsible for providing innovation on a case-by-case basis when any customized order is placed. In other words, they will monitor and provide solutions the innovation requirements of each customized order. Due to this, they will need to be alert and equipped to provide quick solutions in a matter of hours when an order that requires innovation is placed. The pure/primary innovation unit will be concerned with the design of new products and services that are structured. In other words, when Bang & Olufsen decides to create a new product, the primary/pure innovation unit will spend time designing, testing and coming out with the new product. With these new segments established, there is the need for IdeaLab and IdeaLand to have components within their units for pure/primary innovation and situational innovation. These groups will contribute to appropriate innovation challenges where required by working together. To ensure that there is good communication and co-ordination, there is the need for innovation to be managed in a structured manner. This will require the formation of a design management unit that will ensure co-ordination between IdeaLab and IdeaLand and also monitor and run the various innovation meetings that will be held by the various components of the organization that used to meet including representatives from IdeaLab. This way, IdeaLab will be forced to contribute to the status quo and with a structured system monitored by the Design Management Unit, there is likely to be conflict resolution that will lead to norming and performing in the shortest possible time. Fig 1: The Relationships of the Units in the New System From the diagram, it is clear that IdeaLand and IdeaLab will have to be represented in the situational unit of the innovation system that will be set up to handle emergent matters with customized goods. The Pure innovation units will also have representatives drawn from both sides. The new Design/Innovation Management unit will be primary responsible for the co-ordination and communication between the IdeaLand and IdeaLab. This will help the two units to work together peacefully and successfully. However, the new system will not in any way destroy the 80 year old tradition of brainstorming. IdeaLand and IdeaLab will have to be represented in the normal brainstorming session with the engineers, architects and other units of the innovation system. Again, the Innovation/Design Management unit will have to play a coordination role in the process, although they will not have the power to limit any of the units in the constructive debates. Management can always come in to give their contributions and monitor the innovation process. Conclusion There is an urgent need for Bang & Olufsen to eliminate retail units in the handling of large and customized orders. This will enable them to use trusted and fast courier services to transfer orders to clients in the shortest possible time. However for mass produced stocks, they will need to use strong forecasting and communication techniques to monitor and ship appropriate volumes of stocks to the different retailing outlets. For the conflict between IdeaLab and IdeaLand/the traditionalist units of the company, there is the need for IdeaLab to be integrated gradually into the organizations culture through the establishment of a a Design/Innovation Management unit that will monitor and support in the integration of the unit. Read More