ProDesign International A/S

1. ProDesign International A/S Group A

2. Which difficulties have the Danish eyewear manufacturer ProDesign International experienced in implementing SCM? Problem statement - Questions Asked General Questions - Please state ProDesign’s vision and mission. - Please briefly outline the competitive situation in the industry. SCM and implementation - Have you during the last few years actively attempted to change the relationship with your suppliers, and if so what has happened to: Information sharing Horizontal Business Processes Number of suppliers Delivery time and quality of input Coordination and sharing of information with suppliers (electronically) - Did you encounter any problems in the process? - How did your suppliers react to the introduction of e.g. new processes at ProDesign? - Are you planning on intensifying the relations to your suppliers even more? (E.g. joint ventures, forward or backward integration)

3. Assumptions and Delimitations • Focus on the up-stream part of the value chain. • The analysis is based on Vokurka and Lummus’ (2000) 7 recommended supply chain management issues.

4. ProDesign International • Danish design eyewear manufacturer. • Established in 1989 but started a major turnaround in 1998 due to diminishing results. • The new business concept increased focus on technical innovation, high product quality and design instead of a more price oriented view.

5. Industry Overview • Highly competitive industry (Lindberg, Bellinger, Eye Eye in Århus alone plus competitors like Luxottica internationally). • ProDesign draws attention through groundbreaking design that challenges suppliers and fosters learning throughout the supply chain.

6. Industry Overview • Rising raw material prices in recent quarters margin pressure. • Common to the Danish eyewear industry is a focus on innovation and revolutionary designs – an appropriate strategy given the fact that competition in the eyewear market primarily is on design and customer service and less so on price.

7. ProDesign’s Mission • ”Ongoing collection development, to be designed in accordance with our interpretations of fashion trends and new production technology.” Source: ProDesign International Business Partner Concept

8. Core Principles • “While retaining a competitive edge in a fast moving market, ProDesign remains true to the lifestyle values of Denmark where care and attention is always given to the individual, to suppliers and distributors, to ProDesign’s own personnel, and to eyewear retailers worldwide.” • Value generation at each step of the value chain – redesign or abandonment if necessary. Suppliers (1st & 2nd tier) ProDesign Denmark Eyewear Retailers End User Source: ProDesign International Business Partner Concept

9. Core Principles- Supply Chain Strategy - Making highly innovative products through strategic long-term relationships to suppliers securing high product quality and on time deliveries.

10. Turnaround • Poor performance in late ’90s Hiring of Mogens Frederiksen (former Red//Green CEO) in ’99 ”Progress through innovation, groundbreaking design and tight financial control.”

11. Turnaround • Change of strategy from dispersed supplier relationships to closer-knit win-win relationships characterized by sharing through trust on time delivery + higher quality greater customer satisfaction. • Implementation of new administrative data system in 2000 – reluctance to change limited due to favorable demographic composition plus the fact that ProDesign is an innovative company by nature.

12. Orientation Towards ERP • Introduced new software package in 2006 (Visma) • Integration of the entire value chain. Value-Network Enterprise Departmental ProDesign’s current position • Departmental • Each department operates as an isolated department. • Enterprise • Information is shared between departments throughout the enterprise. • Value-Network • Information is shared throughout the entire supply chain.

13. Channel Design

14. The Design Process

15. Implementation Issues • In order to achieve supply chain excellence, the company must be willing to change the way it does business. • It is important that SCM issues are addressed at all organizations along the horizontal process.

16. Vokurka and Lummus • In order to implement supply chain management successfully Vokurka and Lummus (2000) emphasize seven implementation issues that a company should focus on. • The difficulties of ProDesign’s SCM implementation process will be considered in reference to these 7 management issues.

17. Implementation Process and Issues • Openly share information with suppliers • Mainly through the design phase – AutoCAD is used as a standard software package throughout the industry. • The main problem that occurred was that some of the suppliers weren’t in the possession of videoconference equipment but made the investments (DKK 100.000) on ProDesign’s request. • Supplier review of sketch drawings followed by e-mail feedback or videoconference. • Videoconference meetings every 2nd week. • Discussion of urgent issues.

18. Implementation Process and Issues • Creation of horizontal business processes • The turnaround affected most horizontal business processes. • Lack of data compatibility – New vs. old system. • The new system (2000) improved: • Internal processes improved through common platform. • Data management. • The opportunity to pursue major goals. • On-time delivery and higher quality products.

19. Implementation Process and Issues • Rely on a smaller number of outside suppliers • Major purposes of ProDesign’s turnaround were to bring down the number of suppliers in order to build a closer relationship through the set-up of long-term partnerships. • The supplier’s idiosyncratic (asset specific) investments in manufacturing tools underline a more committed and long-term oriented relationship. • The long-term relationship serves as basis for shorter-term planning in regard to production capacity and the achievement of higher quality products and on-time deliveries. • The reduction of suppliers did not imply any major problems due to short-term contracts but supplier screening lasted 4 years.

20. Implementation Process and Issues • Increasing organizational and process flexibility • The new software system (2000) increased the organizational and process flexibility - In regard to more standardized processes throughout the supply chain. • Some employees had a negative view of the new technology, especially because it implied major changes to their job. In this regard ProDesign must: • Ensure that the employees is prepared for the implementation. • Provide training for employees at operational and tactical levels that focuses not just on how to use the software but also on how the software will make their job easier and more efficient (doing the things right).

21. Implementation Process and Issues • Coordinate processes across organizational boundaries • Process collaborative planning, forecasting and replenishment takes place. • ProDesign maintains a gentleman agreement with its suppliers about flexible production capacity. • Serves as a buffer against fluctuation in demand, and provides ProDesign with a competitive advantage in periods of high demand. • Communication about forecasting etc. is limited to e-mail communication after first stock order is placed.

22. Implementation Process and Issues • Empower employees to make process decisions • Decision makers from the strategic as well as the tactical levels are involved in most of the decisions regarding the supplier network. • Due to the size of ProDesign a relatively hierarchical structure is justified. It could be argued that top management should not get involved with tactical and operational issues – delegation appears to be a forgotten virtue. • Top management: Strategic issues • Middle management: Tactical issues • Employees: Operational issues

23. Implementation Process and Issues • Make real-time decision support systems available • ProDesign has not managed to implement real-time decision support systems. • However, a real time support system may not be appropriate. • Impossible to convince every customer (optician) to share e.g. real-time replenishment information with the suppliers.

24. Recommendations • Implementation of a PLM software package • Integrating product information that may be housed in different software systems. • Information available to decision makers on a real-time basis. • Better handling of on time deliveries. • Implementation of ERP software • Integrating ERP would lead to increased efficiency in the supply chain preventing sub optimization. In addition: • Information will replace inventory • Coordination will replace functional silos • Win-win strategy will replace sub-optimization • Knowledge will replace condemnation • But the unpredictable nature of the industry poses certain difficulties to ERP implementation such as fashion trends. • E-procurement • Enables electronic processing of stock orders and reduces transaction costs. • Increased overview of inventories at ProDesign as well as suppliers. • Empower employees • Top management should be better at delegating responsibility.

25. Q&A

26. References • Interview – CEO Mogens Frederiksen • Danish News paper Børsen, 20.06.2007, pp. 14 • Danish News paper Børsen, 08.09.1999, pp. 10 • Danish News paper Børsen, 23.07.2001, pp. 7 • The Role of Just-In-Time in Supply Chain Management, The International Journal of Logistics Management, Volume 11, Number 1, 2000, Vokurka, Robert J., Lummus, Rhonda R. • ERP and Supply Chain Management, Madu, Christian N., Kuei, Chu-hua, 2004 • ProDesign Annual Reports 1999-2006