Smart relay Case

INTRODUCTION:Smart relay case vividly depicts the usual built in conflict between Marketing and Production function . Production being cost center , Standardization is advocated by the VP production , Which is as usual resented by Marketing VP being Revenue center , who wants to maximize the revenue by offering more models , more product line there by covering every nook and corner of all the market segments. Strategy meeting hovers around arguments in favors of and against automation . The Company is process focused and VP Production wants to transform it to Product focused Organization , pruning frivolous redundant product lines and focusing their efforts on More Profitable product lines. ISSUES:The following issue arises (1) In an industry , where obsolescence rate is very high and presumably fast product life cycle , which Product line or products should be selected for focused efforts. (2) Focused product line shall need committed production facilities , which has to be high production line ,to achieve Production economics , what if the consumers taste and preferences changes ? (3) This line of hypothesis ignores the fact that the existing Customized Process focused efforts also lead to and contributes toward profitability, as the Pricing strategy will be also customized ,i.e. market skimming pricing strategy. (4) this line of arguments can also be challenged fundamentally by the argument that this presume the COST as the Organization strategy , totally overlooking the fundamental KNOW YOUR CUSTOMERS CONCEPT. (5) KNOW YOUR CUSTOMERS : Relevant questions can be raised , as to whether the companys customers base is COST CONSCOUS and whether it matters to them ?. The case facts highlights that the product is reasonably priced and customers are not pinched about the cost and the price of the same . (6) The arguments can be put forward that the relays are used in the process plants like refineries , where they are almost like VITAL category items . when item is VITAL category , the strategy should revolve around the Supply Chain management rather than COST aspects . (7) SUPPLY CHAIN MANAGEMNT CONCERN:- This will give rise to another interesting issue as to the cost of reaching the customer, if we keep supply chain management as the strategy and shortest response time and reliability of product design as the Order Winner criteria keeping over all lowest cost of reaching the customer as to the Order qualifier criteria , (8) PRODUCTION COST CONCERNS:- There again the cost of Producing the unit become a point where the shoe pinches again . hence the point raised by the Production VP is not totally invalid and Useless , because to the customer it is the

landed cost of the relay that is important and not the Cost of only producing the unit, ex-work . so to the customer it is total cost of Producing the unit as well as cost of reaching to the customer , both the costs are important .Hence the cost of producing the Unit is a valid concern on the part of VP production (9) Now in normal situations when relays are utilized in abundance as consumable items in the manufacture of OEM product , It is the COST OF PRODUCING the UNIT that becomes relevant and game will be played around that , but after it is fitted in the plants as after sales services item, the over all cost of reaching the customer that is important (10) TWO PRONGED STRETEGY :Hence we need to think in terms of two pronged strategy , as to adopt a market penetration Pricing strategy while penetrating the OEM market and there after, in the after sales services market , adopt a a market skimming Pricing strategy in the after Sales Services market , reaping fruits of providing fast respons time services and providing timely TECHNICAL SOLUTIONS to the company, RATHER THAN simply.PROVIDING ONLY RELAYS Hence the PRODUCT CONCEPTas well as BUSINESS CONCEPT can be thought of as a composite package of Product as well as Services mix . (11) NOW the focus of the operations management strategy theoretically lies in achiving effectiveness as well as efficiency in both these areas.BIGGEST ISSUE IS HOW FAR IT CAN BE ACHIEVED IN PRACTICE ? (12)EXPERIENCED CURVE EFFECT:_ we need to retain the Strength of organization i.e. Design departments to provide the Service back up.The idea of achieving plant economics by shifting the focus of the organization from Process focus to the product focus , presumably achieving experience curve effect . (13)BETTERMENT OF RESPONSE TIME THROUGH CAD :the suggestion of providing the CAD facility to the ENIGNEERING DESIGN DEPARTMENT , is worth considering as it might improves the response time which is hall mark in providing personalized customised services , provided the additional cost of the customised services are not only recovered but are compensated by way of market skimming Pricing strategy. (14) POSSIBLE LABOUR BACKLASH: The normal concern of labour backlash , to the suggestion of possibility of automizing the plant to achieve the product focus , can also be tackled through carefully thought out union management PR strategy . The Possibility of surplus labour is remote as the market is growing at the rate of 30 % the capacity up gradation can be done through the automisation . without any fear of generating surplus labour. the proper dialogue with the work man can be effective tool to sell this concept of possible option of automising the plant.

(15):The rack less implementation of this automization concept without taking workman in to confidence might generate labour back lash and might generate perceived fear of possible retrenchment . how ever the concept of ancilliaristion can also be explored to give workman alternative effective partners ship with the company inducting fresh and young talent from the family of same senior work man , who owns their own ancilliary units to provide some standard as well as non standard parts . recruiting their offsprings for the automatic plants , there by upgardation the technology is an option available to the company which is worth evaluating. (16)ANCILLIARISATION :A POSSIBLE SOLUTION:-The recruitment of new young talents from the family of the work man might assuage the hurt feelings the workman may have by mere suggestion of automation . company might provide them alternative of generating alternative occupation by setting their own captively linked plant as Business Associate , there by furthering famous Japanese PWP (Plant within plant )CONCEPT. This will shed the extra fat as well as the inefficiencies in the company as well as Plant, which will have spiraling impact /effects on the Companys Performance . This Strategic option need care full considerations. (17)MODULARISATION:A S A POSSIBLE SOLUTION:_ Idea of Modularstion of product design is a text bookish concept which any MBA would throw at once as an answer to the Problem under consideration , the issue which need care full consideration is whether is it possible to achive this typs of Modularised design in the given line of business as wellas Product lines under consideration. ONLY technical persons as well as designers can Provide the answer . But that option is available . It is also a potential option worth weighing . where ever possible the complete design range should be slowly and gradually transformed into a modularised product designs. (18)MODULARISE SERVICE RANGE : Similarly innovative idea of designing Modular services package can also be mooted to provide services range, with permutation combination of differential Cost as well as Revenue streams .this will enhance the marketing range as well as shall provide the leverage to the marketing team to arm them selve with cutting edge Product range as wellas service range . (19)SALE AND LEASSE BACK STRETEGY:-The issue of redundancies of the the previous general purpose machinery Which was used in the Process focused plant can be easily tackled either by Utilising the same for either Design & Developmet purpose or can be sold and leased back to the anicilliary units mooted in para graph number 16 (20) POSSIBLE POWER POLITICS ANGLE :-Behavioralist may/might add further power politics angle to the the case In the process focused , existing

system , the Engineering department and VP Design is enjoying Power and Position due to their technical expertise as well as capability to fetch premium business for the company by way of Customized business . The Production function is reduced to only orders executing agency as per the customized design prepared by the design department . The Possible behavioral tendency to expand Once own empire the Production function might have suggest the Possible Automization move which if implemented shall reduce the importance of Design department and at one stroke shall enhance the Importance of Production function . The Design departments move to give multiple design variations without any economic justification might also get some brick bats as empire building tendency on the part of design department , out of sheer survival instinct. In the Power equation dimensions , it should become very clears to the President that Design department , labor union and Marketing functions interests have common behavoural motives and psychological nexus , hence they all if ganged up against the Productioin VP , on the pretext of rational arguments the production VP s concern for cost reduction should not be thrown away just on the ground of majority concerns and opinions, the underlying de-facto and de-jure Power politics equation angle should be properly weighed and properly accounted for, before final Strategic position decision is taken in to the consideration. SOME POLICY INTIATIVES POSSIBILITY : (21.) Before the final Strategic postion emerges, as an interim measure some long term to medium policys can be planned as well as put in place like customers should not be allowed to select on the basis of fads and fancies , the diversed Product designs, as it might adversely affect the Production batch economics. (22) As a long term policy measure, the efforts should be made by the sales marketing staff to push the customer toward standard designs so encourage building up of Production volume of a given variety so that Production economics does not suffer. (23) All effort should be made to expedite the production cycle time as well as to reduce the response time , to give the quickest possible services as this is vital FOR THE SURVIVAL OF THE BUISINESS, AS Cost is only a Order qualifier criteria , The Response time will be Order winner criteria .