Case study

‘I can’t believe how much we have changed in a relatively The move into ‘Concept’ products
short time. From being an inward-looking manufacturer, The move into higher-margin homeware had been master-
we became a customer-focused “design and make” minded by Linda Fleet, CDS’s Marketing Director, whohad
operation. Now we are an integrated service provider. Most previously worked for a large retail chain of paint and
of our new business comes from the partnerships we wallpaper retailers. ‘Experience in the decorative pro- ducts
have formed with design houses. In effect, we design industry had taught me the importance of fashion and
products jointly with specialist design houses that have product development, even in mundane products such as
a well-known brand, and offer them a complete service paint. Premium-priced colours and new textures would
of manufacturing and distribution. In many ways we are now become popular for one or two years, supported by appro-
a “business-to-business” company rather than a “business- priate promotion and features in lifestyle magazines. The
to-consumer” company.’ (Jim Thompson, CEO, Concept manufacturers and retailers who created and supported
Design Services (CDS)) these products were dramatically more profitable than those
CDS had become one of Europe’s most profitable home- who simply provided standard ranges. Instinctively, I felt
ware businesses. Originally founded in the 1960s, the com- that this must also apply to homeware. We decided to
pany had moved from making industrial mouldings, mainly develop a whole coordinated range of such items, and to
in the aerospace sector, and some cheap ‘homeware’ items open up a new distribution network for them to serve up-
such as buckets and dustpans, sold under the ‘Focus’ brand market stores, kitchen equipment and speciality retailers.
name, to making very high-quality (expensive) stylish Within a year of launching our first new range of kitchen
homewares with a high ‘design value’. homeware under the “Concept” brand name, we had over
3000 retail outlets signed up, provided with point-of-sale
display facilities. Press coverage generated an enormous
interest which was reinforced by the product placement on
several TV cookery and “lifestyle” programmes. We soon
developed an entirely new market and within two years
“Concept” products were providing over 75 per cent of our
revenue and 90 per cent of our profits. The price realiza-
tion of Concept products is many times higher than for the
Focus range. To keep ahead we launched new ranges at
regular intervals.’

The move to the design house partnerships

‘Over the last four years, we have been designing, manu-
facturing and distributing products for some of the more
prestigious design houses. This sort of business is likely
to grow, especially in Europe where the design houses
appreciate our ability to offer a full service. We can design
products in conjunction with their own design staff and
offer them a level of manufacturing expertise they can’t
get elsewhere. More significantly, we can offer a distribu-
tion service which is tailored to their needs. From the
customer’s point of view the distribution arrangements
appear to belong to the design house itself. In fact they are
based exclusively on our own call centre, warehouse and
distribution resources.’
Source: Alamy/Adrian Sherratt

The most successful collaboration was with Villessi, the

Italian designers. Generally it was CDS’s design expertise
which was attractive to ‘design house’ partners. Not only did
CDS employ professionally respected designers, they
had also acquired a reputation for being able to translate
difficult technical designs into manufacturable and saleable ➔
Introduction

products. Design house partnerships usually involved rela- realize that subcontracting was a skill in its own right. And
tively long lead times but produced unique products with although we have got over some of the problems, we still
very high margins, nearly always carrying the design house’s do not have a satisfactory relationship with all of our sub-
brand. ‘This type of relationship plays to our strengths. Our contractors.’ (Grant Williams, CDS Operations Manager)
design expertise gains us entry to the partnership but we
are soon valued equally for our marketing, distribution and Planning and distribution services
manufacturing competence.’ (Linda Fleet, Marketing Director) The distribution services department of the company was
regarded as being at the heart of the company’s customer
Manufacturing operations service drive. Its purpose was to integrate the efforts of
All manufacturing was carried out in a facility located 20 km design, manufacturing and sales by planning the flow of pro-
from head office. Its moulding area housed large injection- ducts from production, through the distribution centre, to the
moulding machines, most with robotic material handling customer. Sandra White, the Planning Manager, reported to
capabilities. Products and components passed to the Linda Fleet and was responsible for the scheduling of all
packing hall, where they were assembled and inspected. manufacturing and distribution, and for maintaining
The newer more complex products often had to movefrom inventory levels for all the warehoused items. ‘We try to stick
moulding to assembly and then back again for further to a preferred production sequence for each machine and
moulding. All products followed the same broad process mould so as to minimize set-up times by starting on a light
route but with more products needing several progressive colour, and progressing through a sequence to the darkest.
moulding and assembly stages, there was an increasein We can change colours in 15 minutes, but because our
‘process flow recycling’ which was adding complexity. One moulds are large and technically complex, mould changes
idea was to devote a separate cell to the newer and more can take up to three hours. Good scheduling is important
complex products until they had ‘bedded in’. Thiscell to maintain high plant utilization. With a higher variety of
could also be used for testing new moulds. However, it complex products, batch sizes have reduced and it has
would need investment in extra capacity that would not brought down average utilization. Often we can’t stick to
always be fully utilized. After manufacture, products were schedules. Short-term changes are inevitable in a fashion
packed and stored in the adjacent distribution centre. market. Certainly better forecasts would help . . . but even
‘When we moved into making the higher-margin our own promotions are sometimes organized at such short
Concept products, we disposed of most of our older, small notice that we often get caught with stockouts. New
injection-moulding machines. Having all larger machines products in particular are difficult to forecast, especially
allowed us to use large multi-cavity moulds. This increased when they are “fashion” items and/or seasonal. Also, I have
productivity by allowing us to produce several products, or to schedule production time for new product mould trials;
components, each machine cycle. It also allowed us to use we normally allow 24 hours for the testing of each new
high-quality and complex moulds which, although cumber- mould received, and this has to be done on production
some and more difficult to change over, gave a very high- machines. Even if we have urgent orders, the needs of the
quality product. For example, with the same labour we could designers always have priority.’ (Sandra White)
make three items per minute on the old machines, and 18 Customer orders for Concept and design house
items per minute on the modern ones using multi- moulds. partnership products were taken by the company’s sales
That’s a 600 per cent increase in productivity. We also call centre located next to the warehouse. The individual
achieved high-dimensional accuracy, excellent surface orders would then be dispatched using the company’sown
finish, and extreme consistency of colour. We could do fleet of medium and small distribution vehicles forUK
this because of our expertise derived from years making orders, but using carriers for the Continental European
aerospace products. Also, by standardizing on single large market. A standard delivery timetable was used and an
machines, any mould could fit any machine. This was an ideal ‘express delivery’ service was offered for those customers
situation from a planning perspective, as we were often prepared to pay a small delivery premium. However, a
asked to make small runs of Concept products at short recent study had shown that almost 40 per cent of express
notice.’ (Grant Williams, CDS Operations Manager) deliveries were initiated by the company rather than
Increasing volume and a desire to reduce cost had customers. Typically this would be to fulfil deliveries of
resulted in CDS subcontracting much of its Focus pro- ducts orders containing products out of stock at the time of
to other (usually smaller) moulding companies. ‘We would ordering. The express delivery service was not required
never do it with any complex or design house partner for Focus products because almost all deliveries were to
products, but it should allow us to reduce the cost of five large customers. The size of each order was usually
making basic products while releasing capacityfor higher- very large, with deliveries to customers’ own distribution
margin ones. However, there have been quite a few depots. However, although the organization of Focus
‘teething problems’. Coordinating the production schedules delivery was relatively straightforward, the consequences of
is currently a problem, as is agreeing quality standards. To failure were large. Missing a delivery meant upsetting a
some extent it’s our own fault. We didn’t large customer.
 Operations management

are in fact pretty accurate, but trying to make a forecast

Challenges for CDS
for every week end every product is almost impossible
Although the company was financially successful and very
to do accurately. Sorry, that’s just the nature of the busi-
well regarded in the homeware industry, there were a num-
ness we’re in. In fact, although Grant complains about our
ber of issues and challenges that it knew it would have to
lack of forecast accuracy, he always does a great job in
address. The first was the role of the design department and
responding to unexpected customer demand.’
its influence over new product development.
Jim Thompson, the Managing Director, summed up his
New product development had become particularly
view of the current situation. ‘Particularly significant has been
important to CDS, especially since they had formed alliances
our alliances with the Italian and German design houses. In
with design houses. This had led to substantial growth in
effect we are positioning ourselves as a complete service
both the size and the influence of the design department,
partner to the designers. We have a world-class design
which reported to Linda Fleet. ‘Building up and retaining
capability together with manufacturing, order processing,
design expertise will be the key to our future. Most of our
order-taking and distribution services. These abilities allow
growth is going to come from the business which will be
us to develop genuinely equal partnerships which integrate
bought in through the creativity and flair of our designers.
us into the whole industry’s activities.’
Those who can combine creativity with an understanding
Linda Fleet also saw an increasing role for collaborative
of our partners’ business and design needs can now bring
arrangements. ‘It may be that we are seeing a funda-mental
in substantial contracts. The existing business is import- ant
change in how we do business within our industry. We have
of course, but growth will come directly from these people’s
always seen ourselves as primarily a company that satisfies
capabilities.’ (Linda Fleet)
consumer desires through the medium of providing good
But not everyone was so sanguine about the rise of
service to retailers. The new partnership arrangements put
the design department. ‘It is undeniable that relationships
us more into the “business-to-business” sector. I don’t have
between the designers and other parts of the company have
any problem with this in principle, but I’m a little anxious as
been under strain recently. I suppose it is, to some extent,
to how much it gets us into areas of business beyond our
inevitable. After all, they really do need the freedom to
core expertise.’
design as they wish. I can understand it when they get
The final issue which was being debated within the
frustrated at some of the constraints which we have to
company was longer-term, and particularly important. ‘The
work under in the manufacturing or distribution parts of
two big changes we have made in this company have both
the business. They also should be able to expect a pro-
happened because we exploited a strength we already had
fessional level of service from us. Yet the truth is that they
within the company. Moving into Concept products was only
make most of the problems themselves. They sometimes
possible because we brought our high-tech precision
don’t seem to understand the consequences or implications
expertise that we had developed in the aerospace sector
of their design decisions or the promises they make to the
into the homeware sector where none of our new com-
design houses. More seriously they don’t really understand
petitors could match our manufacturing excellence. Then,
that we could actually help them do their job better ifthey
when we moved into design house partnerships we did so
cooperated a bit more. In fact, I now see some of our design
because we had a set of designers who could command
house partners’ designers more than I do our own
respect from the world-class design houses with whom we
designers. The Villessi designers are always in my factory
formed partnerships. So what is the next move for us? Do
and we have developed some really good relationships.’
we expand globally? We are strong in Europe but nowhere
(Grant Williams)
The second major issue concerned sales forecasting, else in the world. Do we extend our design scope into other
and again there were two different views. Grant Williams markets, such as furniture? If so, that would take us into
was convinced that forecasts should be improved. ‘Every areas where we have no manufacturing expertise. We are
Friday morning we devise a schedule of production and dis- great at plastic injection moulding, but if we tried any other
tribution for the following week. Yet, usually before Tuesday manufacturing processes, we would be no better than, and
morning, it has had to be significantly changed because probably worse than, other firms with more experience. So
of unexpected orders coming in from our customers’ what’s the future for us?’ (Jim Thompson, CEO CDS).
weekend sales. This causes tremendous disruption to both
manufacturing and distribution operations. If sales could Questions
be forecast more accurately we would achieve far high 1 What are the main challenges and/or problems the
utilization, better customer service, and I believe, signific- company faces?
ant cost savings.’ 2 What would you recommend to the company if they
However, Linda Fleet saw things differently. ‘Look, I asked you to advise them in improving their
do understand Grant’s frustration, but after all, this is a operations?
fashion business. By definition it is impossible to forecast
accurately. In terms of month-by-month sales volumes we