Enterprise Agility: Redesign of a Sporting Goods Manufacturer
Sporting Goods Manufacturer $100mm Sales Revenue
An entrepreneur introduced a revolutionary new product, that sold as quickly as it could be manufactured. The business wasn't managed well, and eventually, cash was depleted and the business sold. The new European owners attempted to centralize control over plants located in Europe, Japan, and the U.S., while the business rapidly grew. The challenge facing the new owners was in determining how to organize the company to achieve a projected four-fold growth. We assisted in assessing the organization and developing a new organization plan.
An analysis revealed that the U.S. dominated total sales, but the key growth market was in Japan. The company held a major market share in a few product lines, but not the majority. Each continent had different market needs, yet new product development was centrally controlled in Europe without representation by the overseas units. Products required to be introduced continually and quickly to respond to market dynamics were slow to reach the shelves.
In the U.S. plant, value-add time to produce a product was 35 per cent of total plant throughput time. Products quoted and delivered in three weeks could actually be produced in six minutes. The physical flow of product was zigzag, and inventory was excessive and imbalanced to actual requirements. Old-fashioned batch technology was used in the factory, making it difficult to meet dimensional tolerances. Poor quality tracking existed along with excessive handling of materials.
Information systems consisted of a mixed bag of software at the locations, unsupportive of user needs. Hardware capacity was peaked at one location. Software developed in Europe for worldwide use had questionable value, and basic delivery information was unavailable.
A matrix organization structure was ineffective and confusing. The emphasis was on central authority and control, with poor communications between worldwide locations. There existed a major risk of strangulating the organization with an impact of high overhead cost.
We recommended a decentralized organization structure consisting of market business units. A market business unit was a self-sufficient productive facility located in a major geographic market. Each unit would have operational autonomy and responsibility to satisfy its market zone for the full range of products required to be developed and produced. Zones were defined for Europe, U.S., and Asia.
We recommended that the information flow within the market business unit be streamlined. Integrated systems supported by a relational data base management system were recommended for ease of data sharing. Suppliers and customers should be electronically linked to the assembly facility.
Factory
cells were developed to produce standard and custom products, delaying
product differentiation until the last possible moment. A factory
rearrangement using cellular technology and Just-in-Time principles was
recommended to reduce the time-to-deliver to within 48 hours of
receiving a customer order. The company quickly adopted the market
business unit organization structure, and is in the process of
implementing the recommendations, including the physical clustering of
factory and office cells. Product development has been transferred to
the market business units.