Ecco Supply Chain Management
ECCO A/S – Global Value Chain Management Issues: * ECCO’s supply chain with production and assembly across the world driving long lead times. * Raw material residing in Europe yet tanneries located in the Netherlands, Thailand, & Indonesia. * Production and market expansion in China. Impacts: * ECCO’s supply chain has a supply chain that has their production & assembly sites established in countries far away from their distribution/retailer divisions. This could cause Inventory problems with sharp changes in demand because they have to ship in more inventory in to their U.
S. and Denmark distribution sites to the various retailers from overseas. * Delays in material flows since materials have to be shipped from around the world (Europe to various tanneries around the world) that might go through increased inspections during border crossings as well as changes in transportation modes during shipping which at any stage could cause unexpected delays. * Intellectual property (IP) breaches and quality decreasing in China facilities are issues to be faced with ECCO’S production and a market focus of expanding in China.
China is an interesting and dynamic country to do business with. It’s one of the world largest counterfeit markets and typically adopts business policies that require a company to transfer some technology knowledge in the form of a joint venture type set up with the local companies in China all in a mission to increase their economic growth. Since ECCO’s competitive advantage is their in-house production processes with their ‘direct injection” technology this might be a problem for them in the future.
In addition, since ECCO’s competitive advantage and business philosophy is focused on quality, this might decrease since the skill/competencies needed to fulfill that standard from the labor market in China may be lower. Cheaper labor yet decreased skill level in the China labor force. Recommendations: * Mitigate inventory problems by Increasing the capacity at the two distribution centers – increasing responsiveness and increasing flexibility. * Reduce risk in delays in material flows by sourcing leather hides closer to tanneries so that there is less distance to travel and would reduce transportation costs. Focus on what ECCO does best and outsource the rest. ECCO’s competitive edge is in their innovative technology processes – R&D is their strength. With that said out source the leather production. Shortening the supply chain by purchasing leather would reduce the number of fail points and free up capital allowing ECCO to focus on more critical success factors. * Continue R&D investments developing new technologies and processes make it very hard for competitors to keep up. Also, obviously have patients and legal protection which ECCO is already employing.