This study is designed to help in doing the determination whether to wholly travel the entire fabrication of Skagen ‘s merchandises from its current makers to a individual state with cheaper labor costs. The study foremost highlights the advantages and disadvantages of traveling in front with the transportation procedure. The 2nd portion of the study will reexamine Skagen ‘s current runing systems in order to see what possible alterations might be needed if the proposal is being adopted. Current company scheme and aims will be reviewed to find whether the determination fits into house ‘s broader operating model. To reason the study goes farther to suggest some determination doing techniques ( and the required informations and informations beginnings ) from the ‘Management Decision Making ‘ literature that can potentially help in the determination devising procedure.
SECTION 1- Advantages and disadvantages of traveling fabricating procedure to India or China
Transfering all fabrication activities of Skagen to one low labor cost state comes with many benefits every bit good as challenges.
First there is the benefit of a lower Cost of labor. Skagen is labour intensive given that it produces a assortment of merchandises and does non prosecute in mass fabrication.
With lower labor costs, Skagen can significantly cut its monetary values to offer great quality merchandises at lower monetary values. This will assist the company to stay rivals and even to undersell it rivals in the country of ticker industry. Some of its rivals such as DKNY, Guess, Police etc. are already fabricating in low cost states such as Mexico, China and the Philippines.
These rivals are better placed to better the quality of their merchandises while maintaining the monetary value sensible. This move will assist the company to better vie in this competitory market. As a direct consequence the company can reassign labour cost nest eggs to its consumers through lower monetary values while besides guaranting higher profitableness.
Skagen presently runs its fabrication from several locations. At present it beginnings parts and constituents from different states even though the assembly procedure is completed in Denmark. Transfering all these procedures to one low labor cost state will convey about consolidation of operations. The consequence of consolidation is that propinquity between different participants in the fabrication concatenation is increased and this can heighten effectivity while cutting clip and cost spent in traveling stuffs and resources between different units in the supply concatenation. Control and supervising becomes facilitated as all procedures are carried out under one ‘roof ‘.
A move of fabricating operations to a low cost state can enable Skagen parent company to concentrate on its nucleus strength which is design. The nucleus competence of the company from the words of its two laminitiss is ‘design ‘[ 1 ]. The move aligns with its vision statement which states ‘By 2015, A Skagen Designs will be the first pick among providers, clients, consumers, and employees as the most advanced and profitable design goods company within our chosen strategic sections, merchandises and markets ‘.
Low cost states such as China and India have a hapless repute with respects to the lastingness of their merchandises. Low cost fabrication has ever been associated with via medias in quality. It is no uncertainty that high terminal maker have ensured that the most value adding portion of their fabrication procedure are kept in reputable fabrication states. The industry of Swiss tickers for illustration has be restricted to Switzerland to guarantee that the quality and long standing repute of the merchandise is non compromised.
Traveling to a low cost state such as India or China can do a reputational dent on skagen merchandises and besides bring about other choice direction issues. Low labour cost states are associated with the production of lower quality merchandises. Firms in low labor cost states have historically been accused of boisterous patterns such as development and the usage of child labor. Skagen relies greatly on its repute of high quality merchandises and its corporate societal duty to its communities.
Transfering production from several states and units to a individual unit constitutes high fabrication hazard to the full company. In the event of catastrophes such as temblors, fires or political convulsion such as work stoppages, civil wars, the Skagen Company will be extremely exposed and badly compromised. Traveling all units from many states to one state besides exposes the house to macroeconomic fluctuations such as exchange rate alterations and currency fluctuations. Operating in several states provides a natural hedge to fluctuations within the planetary macroeconomic environment.