Carlsen and Agsten Companies: Production and Supply Chain

Abstract

This is an analysis of a case study involving Agsten and Carlsen companies that formed a partnership where Agsten supplied products to Carlsen. At the time Agsten was considering to relocate, it had started to experience communication and skills transfer problems. That was in addition to the failure to deliver good quality products and services to the customers on time, failure to identify the best relocation option, challenges due to changing market landscape, decline in profits, and failure to integrate new technologies and other supply chain concepts for competitive advantage. In addition, the company was facing relocation problems because of the difficulties involved in making the right decision because of competing options that required careful evaluation to settle on the best option. Content analysis was conducted on the literature review to determine the best strategies to adopt and integrate into the business solutions that were consistent with the growth of the company by including technological changes and new decision-making approaches. Among decisions that were justified were to integrate supply chain management strategies with information systems technology and the just in time manufacturing concepts to optimise the available resources that include space and organisational structure to optimise the operational efficiency when identifying the best option where to relocate.

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Introduction

The rapid changes in Carlsen’s external and internal operating environments and the emerging rivalries in the market contributed to the decision for Agsten to consider the options to relocate. The problem to relocate was important for Agsten to avoid high transportation and operating costs, a shrinking market size, supply chain management problems, and product quality and transportation problems to maximize returns on investment. The idea to relocate was discussed by Carlsen and Agsten, but without much emphasis and little progress. The lack of emphasis on the idea to relocate at the time of the discussion was because of the nature of Agsten’s business operations that required the company to be close to Carlsen. The idea to relocate was a new strategic approach to counter the problems and the barriers to relocation (Gerwin 4).

Because of the industry and market dynamics and evolutions, the increasing demand for high quality products, increasing competition from the new entrants, and the need to increase the market share were some of the pressing issues to consider. The need to adopt new product manufacturing technologies, the companies’ organisational structures, management issues for the workers, skills development of the workers, and the growth and decline and the performance of the companies were additional issues for Agsten to consider in its relocation strategy (Stevens 45).

Here, the case study provides a detailed summary of the organisational structures of the two companies, the business processes, the strategies for growth, the management issues, supply chain management issues, the strategies for market growth and the best business strategies of the companies to adopt. To understand the case study in the context of the problems affecting the companies, the study will conduct an analysis of the case study to understand the underlying reasons that led to the relocation of Agsten, the relocation options, and the barriers for choosing the final solution and the strategies used to overcome the barriers.

The goals of the study

  1. To analyse the relocation options based on market, technology, and business strategies and trends.
  2. To analyse the problems underlying the need for Agsten to relocate based on the evolutions of technology and market dynamics.
  3. To identify the barriers to relocation in the context of technology, business strategy, market trends, and consumer behavior.

Literature Review

Competition and supply chains issues

The case study shows the successive developments that were experienced by the two companies when they started the production of high quality coating photoresist. The issues that were under consideration in setting up the business organisation were economies of scale and the cost of production to optimise the performance of new machines that had been installed in the company premises. The most critical elements in the study were the dynamics of the business environment such as the economies of scale, the systematic coordination of the activities that provide a framework for companies to function across themselves to improve the long term performance in the production of the coating photoresist imaging films.

Slack, Brandon-Jones and Johnston argue that in theory, the systematic coordination of the production activities in the firms were based on the success of the supply chain management processes of the two companies where Agsten was to supply Carlsen with the required products for its manufacturing activities (15). Both companies were operating on an industry that required real time delivery of components that were necessary for their production facilities to optimise the cost of production, ensure real time access to the raw materials that were required for the production facilities, and reduce the cost and damages that occur when transporting the components (Slack, Brandon-Jones and Johnston 9).

Typically, supply chain management and transportation were the main problems affecting the industry. The supply chain management problem could affect the delivery of the components by Agsten to Carlsen, a factor that necessitated Agsten to relocate. In theory the underpinning motivation to relocate compelled Agsten to design a strategy for an effective supply chain network, effective distribution chain management strategy, an effective transportation strategy, a good channel management strategy, and a good business integration process.

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According to Stevens, the creation of effective supply chain management and business strategies were important for Carlsen and Agsten because a well-managed firm with a well-defined and developed supply chain management strategy integrated to its business strategies enhances the performance of the firm (28). In addition, the supply chain management strategy is important for both companies to address because it could enable them to identify the right market segment to operate and the competitive strategies to use in the new market segments. The case study shows that the production and transportation of components from the source to the destination was incurring problems such as being damaged when on transit and there were delays in communication especially when new technical changes were required to be made.

Business strategy

According to Slack, Brandon-Jones and Johnston, a good supply chain management strategy that is integrated with the business strategy of the companies could enable the firms to develop a product supply strategies that are cost effective. Agsten could use a business strategy that could allow for relocation to solve the distance and communication problems that characterised its supply chain management processes. In addition, that could solve the costs associated with the loss in delivery time, the damages, and communication problems that the company was experiencing (Jauhari and Dutta 23).

It is critical to understand that the cost and the service tradeoffs that Agsten was experiencing in its service delivery to Carlsen were crucial in its business processes. It is important to note that with effective supply chain management strategies, Agsten could deliver superior quality products and services with superior values to the customers who were buying from the company in an effective and efficient way. Here, an efficient frontier can only be experienced if the firms use a business strategy that factors the cost of delivering the products to the purchasing company to ensure low supply chain costs, real time communication, and short product delivery time to enable a trade-off between cost performance and product quality.

In its business strategy, Agsten could decide to operate from the point of the efficiency frontier that made the company to choose between supplying its products and services to Carlsen from the best strategic locations to achieve could offer cost and quality advantages for both companies. The strategic approach could be informed by the increase in the number of competing firms operating in the dry film photoresist industry and the resulting marginal erosion that was a serious point to consider when Agsten was reformulating its business strategies (Gerwin 24).

Supply chain management

It has been established that those firms that do not operate with efficient supply chain management strategies experience a drop in cost savings and market performance as is the case with Agsten. It is crucial to note that the business strategy that is adopted by Agsten could make it operate efficiently by considering the demand and price functions that it commands in the market. Although that is unfortunately not reflected in the company’s business strategy, the current business trend, the market forces, the threat of the new entrants into the market, the provision of substitute products, and the dynamism in the market is a wakeup call for the executives of the Agsten company to revise the company’s business and supply chain management strategies to counter the increasing threats and emerging market trends. From the supply chain perspective, the core elements for Agsten to consider include order delivery lead time, responsiveness, reliability in the delivery of the products to the intended destination, and quality of the products.

Order delivery time

The order delivery time is critical in the supply of the products and services demanded by Carlsen because it is the total time spent to deliver the products and services to the company to avoid inconveniences that arise when there is a need to make technical changes to the products and services being offered. There is a significant difference between the customer order promised cycle time and the actual delivery time in the case study. In addition, a gap exists between the order and delivery cycle time, that makes the products receiving company to suffer the loss of product delivery time that translates to the loss of money and the cost function.

Current trends in the supply chain management strategies identify two most important elements that include the supply chain lead time and order-to-delivery lead time in the supply chain management strategies. In addition, when those strategies are integrated into the business strategies of a company, the companies are able to achieve a cost and market advantages. Typically, the lead times include the “supplier lead time, manufacturing lead time, distribution lead time, and the logistics lead time for transport of products to the customers” (Marlin 29). However, for the cases study, it is evident that in addition to other causes of delays, there are interface delays that occur between Carlsen and Agsten.

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Other supply chain trends that were catching up with the supply chain strategies of the company in the case study include identifying the current point s of differentiation for the current supply chain strategies, rectifying the current supply chain points of difference, and changing the customer ordering points. The restructuring could enable Agsten to create a strategy to relocate to be able to achieve the right point of differentiation, change the value addition points, and adjust the supply curve to address the customer delivery time.

It is important for Agsten when investigating the sole source supply agreement with Carlsen to determine the customer penetration point and that include elements such as the make to stock points, the configure to order, and make to order points that are critical when making a coupling or decoupling points for the companies.

The competitive landscape appears in the case study in terms of the increase in the number of suppliers of the products that were in Agsten’s domain. The effects were a decrease in profits and a shrinking market share of the company. The scenario unfolds a new approach that the companies were using to address the problem. The strategy was a business partnering approach that could enable the companies to work together to overcome the challenges of loss in business that were affecting the performance of the companies it he market.

Just in time manufacturing

Other trends that have appeared in the literature of the supply chain management is the just in time manufacturing strategies and the use of information systems to manage the supply chain management issues. The just in time manufacture strategies provide the business with the ability to achieve competitive advantage by striving to ensure good returns on investment are made on the company’s investments. The just in time manufacturing strategy is an evolution of the supply, chain management strategies because it will enable the company to keep its inventory to the minimum to address the changes in product demand and the quality of products that are demanded in the market.

Studies show that those companies that have adopted the JIT strategies are able to achieve the cost advantage because price changes and demand changes such as changes in the technical specifications of products are not able to affect the company adversely. In addition, the time wasted to produce and keep an inventory of product that sometimes might be outdated could be overcome. That could also address the problem of quality volatility that could provide the firm with the desired competence in the production of high quality products that could lead to competitive advantage.

When considering the strategy to relocate, the company should ensure that the total quality control mechanisms are in place and the design flow of the products that the company produces for Carlsen are well organised to reduce the set time for the production activities. In addition, the quality control mechanism to assure the reduction in worker’s complaints should be in place. Research shows that a good quality management system provides a company with the ability to integrate different quality metrics that lead to good quality products. The measures ensure workers participate in implementing product quality to reduce the complaints that arise because of the communication problems and in case failures occur, a failsafe strategy should be adopted.

Supply chain management information systems

Another evolution in technology that has occurred for the Carlsen and Agsten to consider is the use of supply chain management information systems. The core competencies of using the information systems technology could provide the company with a competitive edge because there is nowhere in the case study that the companies have planned to adopt the technology. In addition, research shows that integrating information systems into their business strategies and supply chain management procedures could help the companies to plan well, formulate appropriate business strategies and policies for relocation, help in real time problem solving, and help in the planning and scheduling the company activities during the relocation and production period.

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Research studies show that when an information system has been integrated into the company processes, it enhances decision making because data mining can be done to access the right data to support the decision making process. The contributions of the technology are to assist and support business operations at the strategic, tactical, and operational levels.

Relocation options

From the case study, Agsten had the options of either to stay in the current station, relocate to southern Sweden that was not close to Carlsen, locate near to the

Norrköping plant, locate by using the extensions provided by Carlsen, or let Carlsen to operate its conversion business processes for Agsten. However, it was up to the company to evaluate the strategies to adopt that could be beneficial to its growth and business operations.

In theory, research shows that corporate relocation occurs due to several reasons. The core reasons that drive relocation is to improve business competiveness, improve the market position of the company, increase the revenue and returns on investment, and reduce the costs of operations by moving closer to the customer. In addition, some companies could move closer to the customers to reduce the corporate structure costs. In the case study, Agsten is a supplier of products for Carlsen’s manufacturing processes. Among the benefits to consider were the rent savings that could accrue as a result of relocating to the new station. It has been established from the case study that Agsten was incurring additional renting costs that added to the production costs and the pricing mechanism of its products (Stevens 39). Evidence that points to the costs incurred because of rents could be addressed from the co-location suggestions that had come up in the discussion between the Agsten and Carlsen’s managers.

In theory, relocation provides a company with the competitive advantage and in the case of Agsten could provide many benefits that include effective communication between the employees that could enable problems that were evident because of the distance between the two companies to be solved. When some products were delivered to Carlsen, it was established that some technical changes were required. However, the changes could not be made because of the distance between the two companies and communication problems caused delays. In some instances, the workers could complain about the time wasted waiting for a response from the manufacturer of products because of communication problems (Stevens 45).

Barriers to relocation

The major barriers to relocation that the company was facing include resistance to change that was experienced when the company sent their proposal to Carlsen for consideration. It was rejected because the company’s core business was not in real estate business and making Carlsen to accommodate Agsten in its business premises was out of the question for now. In addition, the other barrier was how the company could be accessed by other companies that use its products besides Carlsen. Agsten was operating a global business and relocating could imply the loss of customers because new competitors were emerging and threatening the company in its core business operations. Other issues that could arise were the cost of doing business, the problem of the concept to share facilities with both companies and, and the structure of the building. It was, however, agreed that the company occupy the area that was extended by the Norrköping plant to accommodate the new company (Slack, Brandon-Jones and Johnston 29). The business strategy was to form a partnership that could benefit both companies. In theory a partnership could enable the companies to efficiently the available space, enable the profitable use of knowledge pools of the people, and enable effective capital contributions such as space. In addition, it could lead to value creation, splitting of expenses, reduction in transportation costs, and enable the companies to utilise their strategic advantages and technologies for their growth and facilitate the growth of their partners.

Space optimisation and organisational structure

Analytically, it is clear from the case study that both companies have to work in the same environment, but use the best arrangements to optimise the available space. That could require the use of warehouse redesign principles to enable the companies to efficiently utilise available space, enable the products and other materials to be handled efficiently, and ensure that the storage and use of space was economical to reduce the instances of damaging products and increase operational efficiencies. The best approach for the companies were to determine the available space, evaluate alternative arrangements, create the most flexible and effective flow paths, and implement the best strategies for space allocation and use.

On the other hand, it is crucial to consider the organisational structure as a tool that could be used to provide direction and communication relationships between the employees and the management. An organisational structure could define how activities such as production, employee supervision and instructions are delivered and executed and how to communicate feedback and issues that arises in the day to day operations. The most important component was to identify the right structure from many alternatives. Examples of the structures include the functional structure that enables the management to group each task according to its functions. Research shows that such a structure works well when the business is small. However for the case study, the companies are large and adopting the functional structure could be disadvantageous. Other examples include the use of a divisional structure that requires the use of smaller organisations under the main organisation. However, the companies in the case study could do well to adopt a more flexible and manageable structure that could be cost efficient and flexible. The matrix structure could be used to address the relocation problems because it could accommodate the different structures and their optimisation solutions.

Methodology

The study used a qualitative content analysis method to analyse the case study for the companies and determine different challenges and issues that Agsten was to address. The core areas of study were identify the relocation problems, the options, and the solutions and link them to the current trends in technology, business processes, partnerships, the growth challenges and strategies, and industry evolutions. The core areas that were identified include the evolution of the supply chain management systems, and the use of information technology for the supply chain management issues.

Content analysis was conducted by the author of this paper to address the research objectives and the sources of data were the case study and different authors who have conducted detailed studies on technology, business strategies, and supply chain management systems for competitive advantages. The coding of the qualitative data was done by evaluating the elements in the study that answered the research objectives by providing different approaches to the solutions of the research objectives.

The case study analysis approach also factored the use of alternative use of solutions to the problems that were affecting the decision by the Agsten Company to relocate. The approach was to identify the problem by using the indicators for identifying the problem in the case study that Agsten Company was facing, establish the issue that were immediate and that required immediate solutions to determine those problems that could be addressed immediately. In addition, it was crucial to establish how the company could relocate, the profitability that could be gained by relocating and establishing the partnership with the other company, and sources and strategies that could lead to competitive advantage.

Results

The analysis from the case study shows that the Agsten was experiencing many relocation problems that include increasing competition from new entrants, lack of new technologies for strategic, tactical, and operational management of the activities of the companies, and poor coordination of the activities of the firm. In addition, the study established that Agsten was experiencing problems with the management of its supply chain activities. One of the problems was a delay in communication and delivery of products of the right quality to satisfy the customers. The problem of poor communication between the supplier and manufacturer was causing technical problems for Carlsen and that was causing losses for Agsten in its market shares. The problem of location was becoming very important because of the need for cost savings, a shrinking market share, and the use of technologies that were becoming outdated. The relocation problem could not be solved at once because there were many options to consider for strategic advantage, return on investment, production of good quality products, better supply chain management strategies. In addition, the company was experiencing the problem of organisational structure because both companies were in a dilemma on how assigned the space that Carlsen offered to Agsten.

Discussion

From the study one notes that that both companies have been in a strategic alliance for many years and both companies were experiencing problems because of the other company’s problems or failure to make strategic business decisions on time for competitive advantage. Special focus was the dynamic changes in the business environment that Agsten had failed to factor in its business strategies. The companies should formulate business strategies for competitive advantage when considering relocation. Typically, the Agsten should evaluate the strengths, weaknesses, opportunities and threats in the market to address the market dynamics. The core areas that Agsten should address include how to neutralize the weaknesses of the company to turn them into strengths, the new markets opportunities for the company, access to new markets and existing markets, and the dynamic evaluation of changing market opportunities.

Typically, the company has to get its internal environment right by matching its resources with the strategic objectives to gain the best out of them. The strategic value of its resources that include the people working for the company, the quality of the products, the structure to use the resources to efficiently and effectively respond with flexibly to any market changes are some of the issues to consider when relocating. In addition, the problem of declining market position, poor quality products, loss of business because of poor communication strategies and technical challenges were some of the strategies to address.

Another area of concern is the supply chain management strategies that should be integrated with the company’s relocation strategies. The study shows that a supply, chain management system should be integrated to provide the company with the relocation benefits of access to labor, quality of service, increased profits and cash flow solutions, and better service and product delivery. In addition to that, the use of space optimization problems solving strategy could help in deciding the best flow control and space utilization options.

Conclusion

In conclusion, it was established in the study that Carlsen and Agsten’s current product manufacturing production and supply chain management and business strategies were the underlying problems that were compelling Agsten to relocate. However, the company was experiencing relocation problems because of supply chain problems, product quality issues, strategic supply chain management problems, and declining revenue and market share. The main problems were supply chain issues, lack of current technologies for competitive advantage including the supply chain management information system, organisational structures that could allow the both companies to work in a joint partnership, and the best options to use to address the relocation problem. The results show that Agsten was at a strategic position to provide high quality product and services to Carlsen by forming strategic partnerships that could allow both companies to positively contribute to the growth of the other. The just in time manufacturing concepts is used to address, product quality, market trends, technical changes, and to avoid overproduction that is not demand driven. Further research into the best strategies for the companies to adopt to ensure better optimisation of existing market opportunities by forming joint ventures to optimise their skills pool should be considered.

Works Cited

Gerwin, Donald. “An agenda for research on the flexibility of manufacturing processes.” International Journal of Operations & Production Management 7.1 (1987): 38-49. Print.

Jauhari, Vinnie, and K. Dutta. Services: Marketing, Operations, and Management, London: Oxford university press, 2009. Print.

Marlin, Paul, G. “Manufacturing lead time accuracy.” Journal of Operations Management 6.2 (1986): 179-202. Print.

Slack, Nigel, A. Brandon-Jones, and R. Johnston. Operations management. Pearson, 2013.Print.

Stevens, Graham C. “Integrating the supply chain.” International Journal of Physical Distribution & Logistics Management 19.8 (1989): 3-8.Print.

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