Recommendations Olympus Optical Company has come a long way in regards to reducing cost and recapturing market share but they are continuing to face problems. In addition to cost issues Olympus is also facing flexibility issues, such as shorter product life cycles and an increasing number of products needed to satisfy customers. To address these problems we recommend Olympus implement a concurrent engineering program, a modular production strategy, and reconsider the functional group management approach.
The concurrent engineering program will reduce product development time and reduce cost. Modular production will increase customer satisfaction by allowing customers to customize cameras with the features they desire. Continuing with the functional management approach will result in increased overhead and redundancy, conflict of interests, and increased overall costs. Cost Reduction Further cost reductions will be realized through concurrent engineering, product modularity, and by evaluating the production process as a whole and not as 10 independent companies.
Concurrent engineering will reduce new product development costs by shortening the development cycle and reducing the need for product and process redesigns. Rather than passing off product designs to the next stage, cross-functional teams can work together to develop innovative, cost-effective new products. Product modularity will reduce overall costs by postponing product differentiation, which reduces inventory needs. Instead of producing certain amounts of every model, Olympus can create a base model that has standard features, but with the option to include additional specialty features.
Evaluating the production process as a whole, rather than 10 individual companies will reduce overhead requirements and redundancy. Ten functional groups would require ten times the amount of management and support personnel. Additionally, the pressures to reduce costs within each functional group might result in process complications further down the line, increasing overall costs. Flexibility Shortening product life cycles and the increasing product variety demanded by customers are key factors that Olympus must address in order to remain rofitable. Concurrent engineering will drastically reduce the amount of time required to develop new products, allowing Olympus to introduce products to market at a much faster rate. This will result in increased market share, either by reducing lost sales to competitors or by capturing more sales from competitors on new products. Product modularity would increase the flexibility of the company’s production processes by allowing for more product customization.
Olympus can continue to offer models that are available for same-day purchase, but it can also gain market share by offering fully customizable products that customers can order through retail stores, similar to a computer. This way, the customer can get every feature he/she desires without having to pay for unwanted features. Introduction of such an innovative product offering strategy could capture market share from competitors. Implementing the functional group approach will create multiple problems in the process that will ultimately decrease the process flexibility.
Measuring the production process as 10 individual companies creates conflicts of interest and longer lines of communication. The pressure to reduce costs might result in one process step cutting corners or ignoring an important issue in the interest of costs. This would create complications further down the line, increasing product defect rates and cycle time, which would ultimately cost the company in the long run. Creating 10 individual companies also results in the creation of 10 lines of communication, which would increase the amount of time required to report a problem.
Additionally, this approach could create accountability issues and difficulty in identifying the root cause of any problems. Overall, implementing such an approach would greatly reduce productivity and, ultimately, production flexibility. SWOT Analysis Strengths Significant cost reductions in recent years Increased sales revenue by almost 70% Increased employee productivity Significant market share Weaknesses Time-consuming new product development process Struggling SLR product line Lack of overseas production Opportunities Improved new product development processes Increased product modularity
Increased product customization Increased automation Increased production overseas Threats Increasing variety of products demanded Short product life-cycles Reduced selling prices Competition Foreign exchange rate fluctuations Action Items -Choose employees for pilot concurrent engineering team -Choose product for pilot concurrent engineering team -Value stream map and list of BOM to determine degrees of modularity -Reconsider functional group management initiative -Recalculate cost of functional group management initiative -Reconvene in 4-6 weeks to discuss progress