Introduction to Portfolio Display’s strategy
Portfolio Display, established in 1985 is a leader in forecourt and advertising display products supplying predominately to the motor trade industry. Our strategy is to sustain this position and to increase turnover by 100% within the next 3 years. In the present state we have 3 buildings, one of which we own and two which we rent. The main building we own includes our sales team, warehouse and graphics studio and is in an excellent position close to motorway networks. Recently we have taken on some large customers and our turnover is increasing. To sustain our relationship with new and existing customers we want to expand and build onto the front of our building where the car park is. This would house new printing technology on the ground floor and a new sales office above on the 1st floor. The new extension would give us approximately an extra 2000 sq ft and provide a professional looking frontage to our company. We want to increase exports throughout Europe and America and the extra capacity would help us to achieve this.
We want to increase our page rankings in Google and generate more business through our online shopping cart. This would help us become more “Lean” by cutting down on paperwork, easing flow and benefit our customer through ease of ordering. We aim to create economies of scale as we grow buy buying in greater volumes and cutting costs. We aim to cut down on all costs and recycle where possible.
To achieve our targets we will monitor our key performance indicators which will describe areas where we need to improve on each month. We are taking on a dedicated product designer who will design innovative new products to provide us with a competitive advantage. In today’s competitive world, companies must aggressively improve the way that they develop products. While the concepts of New Product Design are simple, the implementation of these practices and the process of changing a company’s culture is challenging. Success can be achieved with a well-planned and managed effort. Management must understand not only the concepts of NPD, but the process of managing change within the organisation. The responsibility for making these major changes in culture, organisation, business process and technology can not be delegated.
As Product and process technology is rapidly evolving, customers are emphasising improved quality and reliability. This dynamic and challenging environment requires the implementation of integrated product development concepts to reduce development cycle time and improve product quality and value. Nowadays the design of the product and the process must be integrated to assure a more optimum approach to manufacture and support the product.
Expected generic and business sector trends
According to FESPA the Federal European Screen Printing Association over the last five years there has been a large shift from analogue to digital printing. More and more companies are moving away from screen printing to CMYK digital printing. The benefits of this are the option of offering smaller print runs due to a reduction in screen setup costs. With digital printing the set-up costs are minimal, there are no screens to set up. Instead the design file is ripped to the printer via a dedicated print driver. Colours are processed with the help of dedicated software and a large gamut range of different colours can be produced from Cyan, Magenta, Yellow and Black to produce photo realistic quality images. Due to the increase in digital printing machines, customers expect a faster turnaround. Having this technology implemented is essential to provide the customer with the level of service they expect. Due to the internet the rate of competition is growing. We recently implemented a new UV flat bed printer to meet our customers demands. This new printer is currently housed in a temporary position until we build our extension where it will be housed on the ground floor. Until now we were outsourcing a lot of our print to local screen printers to print small runs. Now we can do the print in-house because our UV digital flat bed printer has the capability to print on a lot of different substrates in full colour. Photo realistic full colour printing has provided us with more opportunities to provide our customers with a higher level of service. Our customers now have the flexibility to be more creative with their designs and now aren’t limited to a certain amount of colours. Previously, a greater number of colours would command a higher price. Our UV printer also has the capability of being adapted in the future to take a roll of media. This would provide us with the capability to print 2.5m wide banners if required. This would provide the printer with an element of sustainability due to it being able to be used for another purpose if needed in the future.
The effects of globalisation on the future of manufacturing
Business as it used to be has changed drastically due to globalisation. Competition has increased due to lower trade barriers and knowledge sharing. There is a greater emphasis on cost reduction and outsourcing to foreign countries. Globalisation is an important business pressure and has to be strategically responded to if a business is to exceed in the long term. Many manufacturing organisations have seen their business strategies dictated by their industry leader. Globalisation is a pressure on business’s to find better ways of competing with global players. Globalisation for Portfolio Display has enabled us to import from China with ease. Containers have enabled us to import relatively cheaply only let down by long transportation times. The internet has enabled us to contact Chinese suppliers we had unheard of. Cheaper airline travel has enabled us to fly out to Shanghai to meet suppliers. Language barriers today don’t seem to be a problem as most speak good English. We are seeing many companies outsourcing their labour to countries like China. ‘Outsourcing jobs are moving from Mexico to China, primarily with low tech/high Labour/high volume product’. (R. Liptrot, 2004). I can understand why this happens when there is such an emphasis today on Lean manufacturing and to reduce costs year on year. China is rapidly catching up though and labour costs will increase, this will bring back some of the manufacturing back to the UK. This would also cut down delivery times and more products would be made to order. Cash flow would ease up due to not having to fill a container and having cash tied up in stock for months.
Lean Manufacturing
Edward Rossman, 2004 describes lean studies as being absolutely necessary, and are the core of great improvements these days. Recently we have introduced incremental improvements to achieve lean manufacturing. We have aimed to increase flow throughout our organisation and minimise waste to provide our customers with a better level of service.
Before considering an extension to our premises we looked at relocating but found nothing suitable. We own our premises and the only available premises in the area were to rent only. We looked at keeping our existing building and renting a premises across the road but we felt this wouldn’t help with communication and the flow of production. Our production department would be in a separate building and we want it to be part of our building to monitor quality accurately. We also wanted to keep motion down to a minimum and have everything connected under one roof. I think due to globalisation more and more companies are introducing lean manufacturing as a tool to achieve competitive advantage. For example Zara uses lean just in time delivery of the latest fashion clothing. Zara has the latest fashion in store before its competitors to achieve a competitive advantage.
Current system performance analysis
We currently are looking at ways of introducing more Lean manufacturing processes. We are taking small steps to implement a continuous improvement program which will ultimately benefit our customers. According to Wincel (2004) Lean manufacturing aims to evolve the production process and typical tools used include the five Ss (sort, set in order, shine, standardize, sustain), cycle time reduction, and work area reconfiguration. We are installing a faster PC in the studio with the latest Intel i7 processor to cater with larger artwork files. This is being installed to help reduce time taken to open files and create artwork. To jusify the cost of the installation more artwork can be produced in a day creating more revenue. To compliment the installation of the new PC the latest software is also being installed to help reduce the graphic designer’s creativity restrictions.
Womack et al (1990) found due to lean manufacturing “Toyota would by most industry observers become the most efficient, highest quality producer of motor vehicles in the world” and would force Ford to follow many of their manufacturing operations. I think lean manufacturing operations can certainly benefit our company. We need to make incremental steps towards lean manufacturing to stay ahead of our competitors. We are currently connecting a computer in another building to our network to reduce time and motion. Files can be sent directly through the network rather than using a memory stick to transfer files.
Suppliers play a big part if lean manufacturing is to be successful. Cagliano et al (2005, page 152) describes the purchasing function in today’s world and explained that “the role of purchasing has evolved dramatically in the recent past…purchasing is more relevant than in the past, to the point of achieving strategic importance”. I agree with Cagliano inventory levels need to monitored carefully because if they become too high they can cover up a lot of underlying problems such as poor scheduling, quality problems, machine breakdowns etc.
According to Chase, Jacobs & Aquilano, a bottleneck is, “a resource that limits the capacity or maximum output of the process”. At Portfolio Display we have to out source manufacturing of certain products because we don’t have the capability of injection moulding plastics and rubber. We recently came across a bottleneck situation for a component which was being made in China. The component was a magnetic block used to attach to car roofs. We wanted to increase the strength of the magnet but keep the same design proportions and bring manufacturing back to the UK to reduce lead times. However the UK produced magnet has proved to be difficult to produce due to a new adhesive used in production and has caused some health and safety issues. In this case a new technology has been used but hasn’t sufficiently been prepared for. I think new technology has to be greatly prepared for to reduce any bottlenecks in the future.
Identification of new and disruptive technologies
The internet has opened up a greater demand for print on demand, publishers are starting to print books on demand. Apple has launched the iPad where books can be downloaded from the internet and be read electronically. Nanotechnology could revolutionise electronics, medicine and energy technology for example in medicine it is being used for treating cancer cells.
It seems more technology is including the capabilities of the internet. We recently published our catalogue online using flash. Customers can download our E-catalogue and flick through the pages virtually online. This not only saves on packing and postage costs but also on print costs. This e-catalogue was relatively cheap to produce and provides our customer with an instant catalogue where pages can be printed if needed.
There is an increase in the amount of advertising produced through the internet. Although we don’t print leaflets, I think people are cutting their print costs back and advertising more through direct email and the internet because it is cheaper. Social networking sites such as Facebook and Twitter are also creating greater awareness especially for smaller businesses. Facebook now has over 400 million active users and of these uses 61% are middle aged or over (Richard Romano, Disrupting the power of print). There seems to be an ageing population of people who now actively use the internet compared to ten years ago. Publishing companies will suffer in the future due to the increase of people downloading e-books onto I-pads. I think although there are downsides to I-pads including possible eye strain, battery life and portability etc. I think the technology will get better.
Proposals for investment
A new extension
Turnover is up 25% this year and our long term investment is to spend �250,000 on a new extension to provide an extra 2000 sq ft. of space. This is a strategically planned move to help meet our future objectives. We have received four quotes from four different architects and have decided to with a local reputable company. Their total fees equate to �13,000 and include managing the project from start to finish. We are currently running out of space to grow as a company and the extra space will help us provide seating for more sales staff upstairs, while downstairs will provide space for a new production room housing state of the art printing machinery. The existing sales office space would be utilised into a graphics studio and the studio space would be utilised into a finishing area. The new extension should be able us to grow from a 1.2 million pound turnover company to a company turning over in excess of 2 million pounds within 3 years. The new extension will help us increase staff gradually from 17 employees to 25.
New extension cost breakdown
Build Costs �1000 per sq metre x 180 = �180,000
Architects fees = �13,000
Planning costs = �2000
Interior fitting out and cladding existing building to compliment new build = �55,000
Total Cost = �250,000
Short term benefits
More space for extra staff and production
Presentable professional exterior and interior to new and existing customers visiting
Nice place for employees to come to work – boost in staff morale.
Better facilities
Energy efficient
Longer term benefits
Adds greater value to exisiting building – building will be worth more as a whole when time comes to sell.
Cost savings from being energy efficient
Increased turnover
Better customer service in terms of what we can offer.
More in-house production – Quality can be monitored more effectively.
New PC and design software
To help be more creative with our ideas and design new innovative products we are investing �3000 in a new powerful PC with the latest adobe illustrator creative suite 5 software. We have decided to take on a product designer to commence a 12 month placement and utilise this software to design four new innovative products. The new products will be aimed towards the motor trade to advertise their cars. Each new product should be capable of bringing in �100,000 per year and help us to increase our turnover to achieve our targets.
Conclusion
I have audited our manufacturing practices and technology against future scenarios and feel we are well prepared. Our recently installed UV flatbed printer will help us sustain our competitive advantage and the installation now will only help us further when we are out of the recession. In the present situation we have run out of space and have no where to implement more in-house manufacturing to reduce bottlenecks and increase quality. Due to us taking on some high profile customers I think now is the time to be investing in a new extension to create more capacity for the future. In this building we can house our new technology we have invested in and will also provide the opportunity to implement bigger and faster digital printers in the future. This report will be used to implement new changes and technologies within our company. We will implement more manufacturing in house to help reduce lead times and to be more competitive on price. The report shall be reviewed every 6 months and updated if necessary. If we don’t make the investment now we will be overtaken by new emerging competition.
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