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Final Individual Case Study


  • pg 1
									“eBusiness from within: The Organizational
       Transformation of Glamox”
          Final Individual Case Study
                     IS 679
               Ashok Ambashanker
•   Introduction
•   Analysis
•   Solutions
•   Recommendation
•   Case Study
•   References
        Basic Description of the Case
• Glamox is one of the largest commercial lighting companies in Europe and is
  headquartered in Norway. Glamox supplies lighting all over the world to large
  office buildings, international airports, multinational industrial companies,
  offshore installations and luxury cruise liners. The company has production
  capacities in five countries across Europe, Asia and North America.

• Glamox had grown from a small local manufacturer of industrial light fixtures to
  a significant player in the international lighting business. Glamox had been into
  many acquisitions. Also Glamox revenues had gone down and operating
  margins were below expected levels. Customer and employee satisfaction were
  low, and clear indications were present of suboptimal order processing and
  delivery system. At this point Glamox came up with a gameplan of revitalizing
  Glamox and reclaiming the industry leadership.
           Key Players in this Case
•   Corporate management
•   CEO
•   Members of Glamox management
•   Stockholders
•   Customers
•   Competitors
•   Suppliers
•   Wholesalers
•   Electrical and Building Contractors
•   Architects & Consultants
Chronological Sequence of Events @
                       Year                                      Events
 1947                         Glamox founded
 1957                         Glamox opens factory in Molde
 1960-1970                    Est. subsidiaries in several European countries

 1989                         Glamox acquired its largest competitor in Norway, Ifa Electric A/S
 Beginning of 1990’s          Glamox troubled by the integration of Ifa Electric
                              Glamox initiated further expansions, most important acquisitions being
                              -Norwegian company Adax Fabrikker (manufacturer of heating equipment)
 1993                          -Aqua Signal (Bremen) (manufacturer of maritime lighting products)

 Jan, 1998                    Christian H. Thommessen taking position as CEO of Glamox
                              Glamox acquired the industry group Hovik lighting (well-established brand
 1999                         with emphasis on design recognized by architects worldwide)
                              Glamox was
                              -1250 employees
                              - 19 subsidiaries
                              - Located in most of European countries, Asia, USA and Canada.
                              - Revenues of 1,300 MNOK (USD 145m)
                              - Largest manufacturer in Scandinavia
 Dec, 2000                    - One of the six largest in Europe

                              Largest and third largest player merged forming a comparative giant with a
 2000                         10% share of the European lighting market
       What is happening @ Glamox
• When Christian H. Thommessen sponsored
    – “Value Chain Reengineering” (VCR) project
    – Project goals set were
         •   delivery precision
         •   reduced delivery time
         •   reduced annual costs
         •   making Glamox e-business ready.
    – Important changes to be brought about by the reengineering process was concepts of
         •   mobile salesman
         •   Single point of contact (SPOC) logistic centers
         •   a virtual central warehouse
         •   EDI-based communication with wholesalers.
• Before VCR project operating margin had sunk below two percent, debts had
  increased to 500 MNOK during the 1990’s, market share in the traditional
  business had decreased. Following were the growth strategy envisioned by Glamox:
       growth strategy within selected market segments
       a redesign of the value chain
       restructuring of the manufacturing function
       What is happening at Glamox
• The financial objectives:
     Boosting the operating profit margin from 1% to 8% to establish as position
     among the industry leaders
     To achieve a profit before tax in 2001 above 150 MNOK

• Goals for the project were set based on key buying factor analysis:
     “Define a new industry standard for delivery precision (at 98%)
     Reduce delivery time dramatically
     Reduce annual costs by 65 MNOK
     Make Glamox e-business “ready”

  But after an investment of 110 MNOK and 2 years the company’s situation can
  be summarized with the statement from Glamox’s Chairman of the Board
“We haven’t reached the expected results. Perhaps we over-invested in the
  VCR process? Still, we probably didn’t have any choice.”
                   What are the problems? Why?
Problem Area            Solution Objective                            Why? Situation reference/proof that it is a problem

                                                                      "An initial financial analysis was undertaken, showing that average operating
                                                                      margin had sunk below two percent" [1, p. 6]. Even after VCR project - "the
Operating Margin        Need to improve Organizations Profit Margin   goal of gross margin around 8% still hadn't been reached." [1, p. 16]

                                                                      Highly competitive industry. "Most of the customers emphasized product price
                                                                      as their first or second buying factor" [1, p. 7]. Most customers also ranked
Product pricing         Need to make Product Pricing competitive      Glamox as worse than the competition on price.

                                                                      Poor delivery precision prominent when salesmen approached customers. Sales
                        Improve delivery precision and reduce         person had quoted that his customer "had an order that were due last week, and
Product delivery        delivery time                                 still isn't delivered" [1, p. 5].
                                                                      "Customer - who often already had a negative experience with Glamox" [1, p.
Customer satisfaction   Improve customer satisfaction                 9].
                                                                      Complex organization, poor empolyee satisfaction, poor coordination. Fredly
                                                                      (then IT/logistics manager in Glamox) had "experienced firsthand the escalating
                                                                      problems of aggressive acquisitions without a matching aggressive integration
Acquisition             Complex organization due to mergers           strategy" [1, p. 4].

                                                                      Glamox targeting to improve market share and quoting "even in the professional
                                                                      market there was a move towards commoditization and increasing price
                                                                      competition" [1, p. 2]. Glamox's vision of "reclaiming the industry leadership"
Competition             Reclaim industry leadership                   (exhibit 5)
      Five Competitive Forces With
Potential Strategic use of Information Resources
Value Chain – Within Firm and Interconnecting
                 Summary Of Possible Solutions
Possible Solution                              Pros                                                 Cons
                                               Increasing margin / Make product pricing competitive
Market analysis and decision support systems     Starting from right product pricing to targeting     Cost of the product
                                               the right product, can be derived using extensive      Ensuring data availability to these systems will
                                               market intelligence software coupled with            require additional workforce
                                               decision support systems
                                                 These work on existing information and data
                                               already in the systems within the organization
                                                 These systems can be directed to obtain
                                               valuable and high quality decisions which can
                                               directly impact competitive pricing and operating
                                                           Meeting delivery commitments
Integrated supply chains                         Links supply chains of vendors and customers         Investment in integrating software
                                               to streamline the process and to increase              Process reengineering would be required in some
                                               efficiency and accuracy                              areas
Data integration tools                           Increased data and information flow between          Detailed application study (like databases)
                                               systems and units, hence better synchronization      required
                                               and availability of order status etc. without          Additional support effort in technically syncing up
                                               elaborate enterprise solutions                       applications (like data loads etc.)
                                                                Customer satisfaction
Customer Relationship Management                Formalized customer relationship management          CRM Product cost
solutions                                       Customer have better access to the organization      Dedicated team would be required to host and
                                                Opportunity to get direct feedback                  maintain the CRM solution
Mobile work – mobile salesman                   Customer orders at point of sale (with                High investment required on IT infrastructure
                                               accuracy) improve customer satisfaction                Clear tangible benefits cannot be determined for
                                                Makes sales force more productive                   the investment
Digital loyalty network                         Will help continuously monitor customer value        Significant cost is setting up the required digital
                                               based on feedback about customer requirements,       network
                                               purchase history, and potential purchases             Enormous IT integration effort
           Summary Of Possible Solutions …
                                                   Acquisition / Complex organization
Collaboration tools                             Will help make a simpler organization and           Cost of collaboration software
                                                bring in oneness through better                     Support costs of related solutions
                                                collaboration, communication and
                                                information sharing

Incremental process changes                     Lesser risk of failure                        Implementation would get dragged on

Data integration tools                          Increased data and information flow                 Detailed application study (like databases)
                                                between systems and units, hence better             required
                                                synchronization                                     Additional support effort in technically
                                                                                                    syncing up applications (like data loads etc.)

                                               Competition / Reclaiming industry leadership
Value chain improvements                        Can compete better with increased overall           High investment
                                                product and service value delivered to              Benefits are not clearly tangible

Market analysis and decision support systems    Starting from right product pricing to              Cost of the product
                                                targeting the right product, can be derived         Ensuring data availability to these systems
                                                using extensive market intelligence                 will require additional workforce
                                                software coupled with decision support
                                                This will greatly strengthen the pricing
                                                system as well as optimize product
                                                variation and will be critical in
                                                ‘reclaiming industry leadership’
My Recommendations to Resolve the Problem Areas:

Recommendation                     Details                              Issues addressed                           Specific product
Deployment strategy –              Implementation process /
      incremental method                 methodology                    Acquisition / Complex organization         NA

                                   Communication and information
Collaboration tools                    sharing                          Acquisition / Complex organization         Sharepoint[7]
                                   Customer relationship                                                           Salesforce ( web based
CRM solution                             management                     Customer satisfaction                             CRM)[6]

                                   Data integration and application           Meeting delivery commitments
Data integration tool                    integration                          Acquisition / Complex organization   Informatica[8]

                                                                                                                   Product similar to GHX
                                                                              Increasing margin / Make product          Market Intelligence
Market intelligence / Competitor                                              pricing competitive                       Solutions[10]
     pricing analysis and                                                     Competition / Reclaiming industry    (GHX is targeted towards
     forecasting tools             Market Intelligence Solutions              leadership                                medical domain)

                                                                              Increasing margin / Make product
                                                                              pricing competitive
                                   Business intelligence and decision         Competition / Reclaiming industry
Decision support software                support                              leadership                           Microstrategy[9]
Case Study Questions
Introduction: : What were the characteristics of the processes for
ordering from Glamox before the redesign of the value chain?

     • The processes for ordering from Glamox before the redesign of the value
       chain was, customer would meet a Glamox salesman, with his order book. The
       salesman had to spend time convincing the customer on the purchase. Once the
       purchase was finalized the sales person had to heavily co-ordinate between
       different units within Glamox to execute the order. The production was based
       on production-to-inventory.

     • Problems faced by the sales force:
          The old process had extremely poor order delivery precision. The mergers
          had left a suboptimal organization and the main victim of this less than
          optimal organization was the sales force.
          Lack of delivery precision led sales team to spend time trying to convince
          customers – who often already had a negative experience with Glamox – to
          purchase once more. Having completed sale the sales team had to spend
          quite a bit of time with inadequate ordering system, databases etc, and had
          to work with a number of counterparts throughout Glamox to help secure a
          prompt and correct delivery of the next order.
Analysis: What are the differences between the previous way of
producing lamp fixtures, and the new, componentized process in
terms of the Lot Size
     • Glamox has moved towards modularized products and order-based
       production. Stock maintenance has moved away from production–to-
       inventory and towards production-to-order. With this new production
       approach, customer specific luminaries could be ready for delivery only an hour
       after the order. So delivery of the customized product was possible within 2-3
       days (48 hours for transport) rather than 3 weeks. Differences between the
       previous way of producing lamp fixtures, and the new, componentized process
       in terms of the following factors, are:
     • Lot size:
            Since the inventory has changed from production-to-inventory to
            production-to-order the lot size is significantly smaller in the
            componentized process. Going by some statistics “total inventory was
            reduced by more than 30%” [1, p. 10], hence since inventory in running at
            30% lesser stock, the lot size can be seen to be around atleast 70% of the
            initial size. Further since lots are made-to-order the lots are specific to
            individual customers, making them even smaller – maybe 50% of 70%.
            Overall we can see the lot size to be atleast half the size compared to the
            initial manufacturing process.
Analysis: What are the differences between the previous way of
producing lamp fixtures, and the new, componentized process in
terms of the Reset Time and Design
 • Reset time:
      Significant points around reset time are that, now Glamox has moved towards
      order-based production and production-to-inventory. These are critical factors in
      bringing down the reset time, to the extent that in the new production concept,
      “customer specific luminaries could be ready for delivery only one hour after the
      order”. Hence the reset time can be seen to greatly reduced compared to the
      previous production approach. Going by overall timeline provided in the case –
      “customer could take delivery of the customized product after 2-3 days rather
      than 3 weeks” [1, p. 12] – reset time can be seen to have reduced to 10% from
      what it was in the old production process.
 • Design:
      Design is moving more to the hands of the customer. Old production model
      would have relied on internal design teams and mass produced products. Though
      in the new componentized process in-house design team’s still would be
      providing the base designs for the modularized products, the end product heavily
      would rely on the customer specifications. Also this has resulted in production
      units transferring control from computers to individual operators, there by
      increasing manual work.
Analysis: What are the differences between the previous
way of producing lamp fixtures, and the new,
componentized process in terms of the following factors
• Management:

     Delivery Time: The most important success factor, of the new modularized
     production process, is the delivery time. A European customer who needed
     3 weeks for a customized product to be delivered by the old processes,
     needed only 2-3 days now.

     Delivery precision: Delivery precision is another key indicator of a successful
     process, also a critical factor for customer satisfaction. Before implementing
     the new production process Glamox scored 81.5% and after the
     componentized process was in place the delivery precision was 93.6% as
     against 95% target set by customers.

     Unit cost: The unit cost increased due to the new modularized process, as
     control was transferred from computers to individual operator, also
     increasing the amount of manual work. This was required to support the
     flexibility required in new modularized production process.
 Analysis: What are the differences between the previous
 way of producing lamp fixtures, and the new,
 componentized process in terms of the following factors
• Management:

     Product variety: The new componentized process clearly increased the product
     variety available to customer, more importantly products which he needs –
     since partly he is creating the product. As can be summarized by statements
     from Glamox, “Three of the product families were initially designed to utilize
     the modularized concept. In 2000, these products represented 15% of the
     company’s total turnover and as much as 35% of the EPL division’s revenue. A
     share that was rapidly increasing.” [1, p. 13]. Further, Glamox’s future product
     development was focused towards modularized products.

     Stocks/inventory: Modularized products dramatically reduced the number of
     parts necessary. Old product family required 2000 parts, whereas now in the
     componentized process only150 parts were required. Also all components were
     stored at the assembly station reducing transportation costs. Total inventory
     was significantly brought down, as summarized in this statement from the
     case study, “as a consequence of rearranging the logistics, obsolete stock was
     lowered and total inventory was reduced by more than 30%” [1, p. 10]
Alternatives: If you were Christian Thommesen,
which part of the organization would be your next
target for IT-enabled change? Suggestions with Pros
and Cons

        Suggestions                       Pros                                             Cons
                                 Spend management system
Ariba                 Will help you capture savings, improve processes,       Product cost
                      and deliver information to improve business             Time to integrate with internal systems
                      performance                                             and information sources
                      Cost savings and visibility across sourcing,
                      contracts, procurement, invoicing and payment

                                  Digital loyalty networks
DLN                   Continuously collect and monitor their customer,        This is just a business model, hence the
                      product and supply chain data and more precisely        company has to imbibe the model and
                      adjust engineering, production, distribution and        infuse into its existing systems
                      sales/marketing activities to meet current and future   Needs considerable management
                      demand.                                                 involvement
                      They can use the same data to enhance their             Requires high level of system
                      partnership with suppliers.                             integration
                      They can increase the effectiveness of supply chain
                      and customer relationship management initiatives
Recommendation: Which alternative from those you just
           identified would you choose and why?
  • Digital loyalty network seems to be the next right step for Glamox. Having
    implemented the Value Chain Reengineering (VCR) project, DLN seems to a
    natural extension of it.

         DLN model will enable Glamox to continuously collect and monitor its
         customer, product and supply chain data and more precisely adjust
         engineering, production, distribution and sales/marketing activities to meet
         current and future demand.
         Glamox can use the same data to enhance their partnership with suppliers.
         Also DLN can increase the effectiveness of supply chain and customer
         relationship management initiatives. DLN will develop a solid network of
         digitized information that will tie together the value chain and create loyalty
         on both the front and back end of business operations.
         On the supply side, DLN will help continuously monitor customer value
         based on feedback about customer requirements, purchase history, and
         potential purchases and rely on digital technology to make certain Glamox’s
         most valuable customers are kept satisfied.
   Other issues: Is there anything about the history of
   the organization or its technologies that might be a
   risk factor management should be aware of?

• Wholesalers approach is a negative trend

• EDI needs lot of maintenance

• Stop mergers still stabilization

• Capitalize on all the assets – don’t throw away, even IT

•   [1] Andersen, E. “eBusiness from within: The organizational transformation of Glamox”. NSM-2002-002a-CA-
    EN, August 30, 2002.
•   [2] Pearlson, E. K. & Saunders, S. C. (2006). Managing & using information systems: strategic approach 3rd Edition. New
    York: Wiley.
•   [3] “Enterprise resource planning (ERP). Referenceforbusiness.com.
•    [4] “Spend Management for the Growing Enterprise”. Ariba.
•    [5] Koudal, P & Wellener, P. “Digital loyalty networks: continuously connecting automakers with their customers
    and suppliers”. Strategy & Leadership. 2003, 31 (6), pp. 4-11.
•   [6] Salesforce. http://www.salesforce.com/products/
•   [7] “Microsoft office sharepoint server”. Microsoft. http://www.microsoft.com/sharepoint/default.mspx
•   [8] Informatica. http://www.informatica.com/
•   [9] Microstrategy. http://www.microstrategy.com/
•   [10] “GHX Market Intelligence”. GHX.
Thank You !

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