Coloplast a/S †Organizational Challenges in Offshoring

COLOPLAST A/S ORGANIZATIONAL CHALLENGES IN OFFSHORING Coloplast one of todays leading suppliers for aesculapian devices and associated services, was established in 1957 in Denmark. The company operates in 5 telephone line areas ostomy, urology ( self-restraint care), wound care, skin health and Amoena, for external breast forms. In 2004, 92. 5% of the total group profit derived from the chronic care divisions ostomy and continence care, which beget very stable product lines.However, as a originate of the companys 2008 strategy consideration revenues were supposed to be ensued by a total of 20% of products established within the past 4 years, dating no further back than 2004. Coloplast is one of the companies that were born globally. In the year of its foundation already every second ostomy bad was world exported, by 2005 97% of its revenue was generated outside of Denmark. Until 2001, the company had six study payoff facilities within Denmark.In 1999, the way level, for the first time, took a closer check at the idea of offshoring its production to a low-cost location. During the following thoroughgoing(a) evaluation period the organization carried out extensive feasibility studies and question Danish companies, which had already offshored to one of the locations in question. The evaluation committee undertook dramatics trips to Poland, Ireland, Czech Republic and Hungary. Eventually, it had been decided to offshore to Hungary.Coloplasts managers where aware of the lyric barrier on the Hungarian side as well as the social impact problems due to the redeployment of Danish employees, hence they took precautions to forfend work stoppages they embarkd an open and honest communication policy. The substantial one-off costs could be minimized by transfer or reassignment of employees in combination with the fashion of voluntary attrition and early retirement. However, the offshoring process uncovered and amplified the weaknesses of the decentralized or ganization.The management realized in order to effectively transfer the knowledge to Hungary they had to introduce standardization into their production process. The companys internal organization had to be changed very fundamentally. Offshoring to Hungary was a great success and the company gained considerable knowledge. Estimates forecasted an yearbook growth rate of 10% leading to a doubled production in 2010, which would require 50% more staff and space. Despite the situation that the Hungary project went very ell, management acknowledge that they had missed out on a few great opportunities concerning for example local sourcing, because the offshoring organization had consumed close of the managerial capacities. The main question for Rasmussen was now Should the internal organizational issues be tackled fist and the offshoring to China initiated later, or is the knowledge they have gained and the guideline they have derived from the last offshoring project enough to proceed i mmediately without the risk of overseeing pregnant issues again?