Industry insight
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Week 5 framework
6.3.1 Effective outsourcing in thunderstorm condition (Q3). With watches fast losing
their functional utility and instead becoming fashion accessories, their design and styling have become key differentiator and assumed central importance. A leading watch manufacturer in India (WM) has invested heavily in design capabilities, in form of a well-established design studio which works on developing differentiated designs for its brands. However, the churn on designs in the open market is very fast paced and even with in-house studio in place, WM has used niche design agencies as suppliers, which develop designs based on inputs from the focal firm. The focal firm is able to assess the quality and potential market impact of the proposed designs not only because it has experienced merchandisers and designers as its employees, its line managers have also developed an intuitive judgement based on their regular interaction with the design studio colleagues. Often, WM is able to lead the design firms by giving them detailed inputs that they cull from consumers and market studies, global trends, etc. Its managers are able to speak the “design language”, discuss fine nuances with the agencies and have developed a bond with them based on mutual respect of each other’s capabilities. WM’s watches are known for their fine styling, according it leadership position in the Indian market. 6.3.2 Failed outsourcing in thunderstorms condition (Q3). In 2010, India produced 3.7 million automotive vehicles, making it the second fastest growing market next only to China. Struggling to introduce new models in the fast-growing passenger car market in India, and threatened by the fast pace of innovations of competing manufacturers, a passenger car manufacturer (PCM) outsourced part of its design activity to external consultant. The consultant representatives were stationed at the design facility of PCM and worked with its employees on specific projects to introduce new variants. The engagement though soon created conflict with both the consultants and PCM employees claiming credit for the ongoing progress. With relationship deteriorating, project schedules suffered and after a six-month period, the outsourcing arrangement was discontinued. 6.4 monsoons (Quadrant 4) This quadrant refers to the outsourcing of processes which are variously and deeply connected to other processes in the organization and where the potential supplier’s improvement and innovation rates are not vastly different from the focal firm. Yet, having decided to outsource the process, presumably to reduce the administrative load on the management and help the organization better focus on the core competencies, the focal firm now needs to find ways of continually improving the capability of the process and at the same time, ensuring that the outsourced process maintains the intimacy and informal interaction with the other processes of the organization ( Hendry, 1995 ). In such cases, often the most optimal solution is to spin off the process as a new business itself ( Gottfredson et al., 2005 ). Apart from the focal firm retaining strategic control over the process which was deeply enmeshed, this also provides the newly created unit with an opportunity to consider the outsourced process as a core-competency (and thus spur its SO 7,3 242 employees to excel) as opposed to the earlier position of it being considered as non-core by the focal firm and having become a candidate for being outsourced. The focal firm would need to use “Strategic Control” through close watch on the development and performance of the new unit often through investing variously like setting up human resources processes which ensure that the culture of the new unit remains compatible with the focal firm and through other investments in continued capability development ( Quinn and Hilmer, 1994 ). The emphasis in this quadrant (Q4) is on close Relationships to maintain the informal interactions and shared communication codes as also Monitoring through strategic control on the various policies related to the development of the new unit. 6.4.1 Effective outsourcing in monsoons condition (Q4). Implements like shovels, pickaxes, hammers, crowbars, etc. cater to the need of agriculture, infrastructure and mining sectors. India’s leading manufacturer of such implements (IM) has been in this business for nearly a century. Since more than a decade now, it has shifted from in-house manufacturing to a fully outsourced, localized manufacturing model. The primary criterion that the team responsible for identifying contract manufacturers looks into is the manufacturer’s “willingness to have a long term relationship”. Suppliers which are deemed to be looking for quick gains or have plans which could run into conflict with IM’s proposed business are weaned out even if they have superior facility and technology to offer. Post-selection also, the emphasis is on building and maintaining a strong relationship that could bear the vagaries of seasonal market that afflicts the implements. Apart from maintaining this relationship, IM also maintains a close watch over the manufacturer’s processes and outputs to ensure compliance to its standards. IM monitors compliance to its standards through its own External Processing Agent (EPA) managers and by employing one trained contract employee each at the manufacturer’s site who file reports on ongoing quality control measures. Despite stiff competition, IM’s brands lead their respective categories and earn significant price premium over their competitors. 6.4.2 Failed outsourcing in monsoons condition (Q4). A steel manufacturer (SM) based in eastern India sold its output to large institutional customers. It decided to shift part of its material from the institutional customers to authorized district-level retailers who would sell its material from retail counters, thus outsourcing part of its sales activity. SM also appointed sales executives who toured the districts, visiting the retailers and keeping record of material availability, stock keeping unit (SKU)-wise stocks, etc. At a pre-agreed stock level, material was despatched from SM to the concerned retailer. Despite regular monitoring and ongoing data analysis, SM has not been able to grow its retail business because it has not invested in developing relationship with the retail community, instead treating the new arrangement as a functional alternative to the institutional customer base. The retailers continue to stock SM’s material but, at the time of selling to a particular consumer, tend to push other brands based on various other considerations. SM has not been able to grow its share in the lucrative retail markets and continues to depend on sales to large institutional customers. Download 329.89 Kb. Do'stlaringiz bilan baham: |
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