Strategic Operations Management Case Study
Selling its products through department stores, Hagen Style developed as a reinserting firm with regarding to direct marketing operations. Hagen Style engaged a number of tactics which allowed them to work al lot of representatives selling their products from door-to-door or at community centre. Hagen Style had two distribution centre in Germany where the orders of the representatives could be processed in a certain sequence. The representatives orders passed through the centre: filling, sealing and addressing the boxes. The journey of an order was always the same.
It is advantageous that Hagen Style sold affordable products of acceptable quality. Standard design labeled the products. Hagen Style run a worldwide expert order fulfillment operations. Because of years of expertise and know- how, the company accomplished a perfect process of distribution. Over time, the policy got a little bit outdated. The problem was that most of consumers were modifying their communication channel between Hagen Style and themselves. 2. Hagen Style’s important operations resources Operations resources are funds and tools which a company provides to combine with market requirements to have an excellent operations strategy.
The process of operations has to find the balance between the external market and internal resources. Roy, 201 5) At first, Hagen Style’s operations resources offered a superior sense of being good at what they did. The kitchen equipment company provided an excellent fulfillment operation. With their two distribution centre, one in the north of Germany and the other one in the south, they are well positioned regarding a fast processing chain. The good locations made it possible to have shorter dispatch routes from the distribution centre to the representatives.
A shorter distance between the distribution centre and the representatives helps to make the entire throughput faster and more economical. In addition Hagen Style had a very modern and highly developed packing and information technology. This unique technology helped to make the process easier and faster. At first, orders were entered in an information system and transmitted to the warehouse. After packing consumers processed the order, the boxes were addressed and sent on their way by truck to the representatives. The largest part of the packing process was standardized and automatic.
That is also a reason why the whole process was fast. Nearly everything worked automatically; that was a benefit of Hagen Style’s operations strategy. Only when a mistake happened, were the boxes then supplied to a manual sector where the boxes were filled by operators. They could profit from their optimal coordinated processes of traditional representatives. Using this kind of sales channels, Hagen Style was very successful with its big network of local representatives. They sold Hagen Style’s products from door-to-door, at places at work, at community centre and at many other localities.
A network of 1 0,000 representatives was responsible for selling the products and bringing the ordered items to the consumers. Hagen Style’s direct marketing equines was successful until the market changed. A slow but steady decline in Hagen Style’s marketing strategy was the reason for thinking over their marketing policy. Due to their excellent distribution skills, Hagen Style’s processes were very cost efficient. Hagen Style’s operation strategy showed that they were good at having lower costs per order and producing high volumes. Processing high volumes means that costs per piece decrease.
Hagen Style was delivering the final product packed in a box back to the representatives and the representatives were handing down the orders to consumers. The upside to this was that Hagen Style’s carriers did not need to deliver directly to individual costumers. The company could also provide a fast throughput regarding their packing technology. Hagen Style distinguished themselves in their fulfillment operations. They provided a fast processing chain with far fewer packing errors, where mistakes were soon revealed through weighing Of the packed boxes.
All in all they were offering a really fast pass through their process chain from ordering to dispatch. (Engel Slack, Operations Strategy, 2008) (Engel Slack, Operations Strategy, 2008) Figure 1: Hagen Style’ s important operations resources 3. Hagen Style’s market requirements Hagen Style’s sales tactic was to work with a big network of representatives who were personally selling kitchen products to consumers in their homes or at public places. The market changed and the tactic did not work anymore. The target market made it clear that traditional representative sale channels were declining in popularity.
New channels were born and selling with representatives was no longer as profitable as it was at the beginning for Hagen Style. Even though this selling process was very cost efficient and revived a fast delivery, it no longer worked well when the market changed. Consumer demand fluctuated as the market modified. As a consequence a fast and cost efficient delivery could not be ensured anymore because of new sales channels. The problem was that door-to-door representatives were said to be an old-fashioned market channel.
As a result, more demand fluctuations were recognizable. Hagen Style had to adapt to the market and its changes. Therefore Hagen Style started selling a defined volume of products in some discounters and planned to offer a certain range in a catalogue operation. On the basis of customers moving towards to different sales channels, Hagen Style had to react and think about distributing their products through other sales channels. (Engel Slack, Operations Strategy, 2008) (Engel Slack, Operations Strategy, 2011) Figure 2: Hagen Style’s market requirements 4.
Courses of action 4. 1 Three alternative courses of action Figure 3: Three alternative courses of action Option A: The first option is that Hagen Style accepts the changes in the market and adapts the company’s processes and resources. The problem is that traditional consumers were changing the communication channels. In the yes of a customer, door-to-door representatives were outmoded. That is the reason why Hagen Style should switch its sales channels from traditional representatives to modern sales channels like catalogues, TV shopping, supermarkets or discounter.
Option B: A second option is that Hagen Style concentrates on what the company’s does best; they should focus on their processing chain and their existing fulfillment operation. A possibility is that Hagen Style could hire out their packing process to Leafage Cosmetics. Hagen Style?s vice president had talked to this company and agreed that Hagen Style would undertake most of Leafage’s order fulfillment process. Option C: A third option is that Hagen Style could subcontract its business to specialist carriers.
By subcontracting to professional carriers, the kitchen equipment company could focus on their packing process and their products. Finally, Hagen Style could benefit from such a subcontract with professionals operating the new and different sales channels. 4. 2 Evaluation and justification of courses of action First it must be said that every option is possible and realizable. Each of the options could be a good opportunity for the kitchen equipment company. Deciding to adapt to the market and the customer needs has the benefit that Hagen Style’s sales channels perfectly fit the market requirements.
On the Other hand it is expensive to convert the fulfillment and packing process. The problem would be the conversion process to the new sales channels. In particular the changeovers for a catalogue selling process will have high costs. A problem would be that the orders are going to be smaller and different in comparison to orders through representatives. Hagen Style’s processes and production machines are made for high volume productions. In addition, the counters sales channel is also designed for a smaller range of products. Hagen Style would have to think about discontinuing some products.
Attention should be paid to representatives who would be disestablished at a certain time during the conversion process. But this modification could ensure stopping declining consumer demands. Option B: Focusing on what the company does best, must be the easiest option for Hagen Style. They could keep going with what they are relied upon and good at packing the products, loading the trucks and delivering. Experience has improved the whole process and made it perfect. Another benefit would be that the company would not stop or interrupt their packing process and fulfillment operation.
But Hagen Style should be careful of concentrating on only one thing because it would lead to neglect in other areas. Focusing only on the packing process questions what to do with the big product range. It is dubious whether the firm would be profitable running the company only based on the processing chain. Option C: The idea of Option C is to hand over the delivery process to professionals. Hagen Style could profit from it because carriers are specialized in this area. A equidistant could be that the kitchen equipment company has to disestablish their representatives and any other employees in the delivery sector.
Hagen Style also must consider that they would lose a part of their fulfillment process. By giving up their excellent delivery process, Hagen Style would have to focus on their products. But considering that this could be risky for Hagen Style, the company should focus on the product sector in which Hagen Style is not best. 5. Recommendation Finally, a combination of Option B and Option C is recommended. Uniting the advantages from both options B and C, Hagen Style could avoid the sedateness of both options.
Therefore Hagen Style could hand over their delivery sector to professional carriers and subcontract their packing process to Leverage Cosmetics. Hagen Style can kill two birds with one stone and achieve the full benefits. Optimally, Hagen Style would be packing for another company (Leafage Cosmetics) and outsourcing their business to specialist carriers. A big benefit is that Hagen Style could keep going with what the company does best: concentrating on their excellent fulfillment operations and gaining profit while us abstracting the processes to Leafage Cosmetics. References Engel Slack, M.
