Concept Design Services

I can't believe how much we have changed in a relatively short time. From being an inward$-$looking manufacturer, we became a customer$-$focused $$design and make$$operation$.$ Now we are an integrated service provider. Most of our new business comes from the partnerships we have formed with design houses. In effect, we design products jointly with specialist design houses that have a well$-$known brand, and offer them a complete service of manufacturing and distribution. In many ways we are now a "business$-$to$-$business" company rather than a "business$-$to$-$consumer" company.$\text{'}($Jim Thompson,CEO,Concept Design Services$($CDS$))$

CDS had become one of Europe's most profitable homeware businesses. Originally founded in the $1960$s$,$ the company had moved from making industrial mouldings,mainly in the Aerospace sector, and some cheap 'homeware' items such as buckets and dustpans,sold under the 'Focus' brand name, to making very high quality $($expensive$)$ stylish home$-$wares with a high 'design value'.

The move into 'Concept' products

The move into higher margin homeware had been masterminded by Linda Fleet,CDS$\text{'}$s Marketing Director, who had previously worked for a large retail chain of paint and wallpaper retailers.

'Experience in the decorative products industry had taught me the importance of fashion and product development, even in mundane products such as paint. Premium$-$priced colours and new textures would become popular for one or two years, supported by appropriate promotion and features in lifestyle magazines. The manufacturers and retailers who created and supported these products were dramatically more profitable than those who simply provided standard ranges. Instinctively, Ifelt that this must also apply to homeware. We decided to develop a whole coordinated range of such items, and to open up a new distribution network for them to serve up$-$market stores, kitchen equipment and specialty retailers. Within a year of launching our first new range of kitchen homeware under the 'Concept' brand name, we had over $3,000$retail outlets signed up$,$ provided with point$-$of$-$sale display facilities. Press coverage generated an enormous interest which was reinforced by the product placement on several TV cookery and 'life style' programmes. We soon developed an entirely new market and within two years 'concept' products were providing over $75$ per cent of our revenue and $90$ per cent of our profits. The price realization of Concept products is many times higher than for the Focus range. To keep ahead we launched new ranges at regular intervals.$\text{'}$

The move to the design house partnerships

'Over the last four years, we have been designing, manufacturing and distributing products for some of the more prestigious design houses. This sort of business is likely to grow, especially in Europe where the design houses appreciate our ability to offer a full service. We can design products in conjunction with their own design staff and offer them a level of manufacturing expertise they can't get elsewhere.More significantly, we can offer a distribution service which is tailored to their needs. From the customer's point of view the distribution arrangements appear to belong to the design house itself. In fact they are based exclusively on our own call centre, warehouse and distribution resources.$\text{'}$

The most successful collaboration was with Villessi, the Italian designers. Generally it was CDS$\text{'}$s design expertise which was attractive to 'design house' partners. Not only did CDS employ professionally respected designers, they had also acquired a reputatio for being able to translate difficult technical designs into manufacturable and saleable products. Design house partnerships usually involved relatively long lead times but produced unique products with very high margins, nearly always carrying the design house's brand.

'This type of relationship plays to our strengths. Our design expertise gains us entry to the partnership but we are soon valued equally for our marketing, distribution and manufacturing competence.$\text{'}($Linda Fleet,Marketing Director$)$

Manufacturing operations

All manufacturingwas carried out in a facility located $20$ km from head office. Its moulding area housed large injection moulding machines, most with robotic material handling capabilities.Products and components passed to the packing hall, where they were assembled and inspected.The newer, more complex, products often had to move from moulding to assembly and then back again for further moulding. All products followed the same broad process route but with more products needing several progressive moulding and assembly stages, there was an increase in 'process flow recycling' which was adding complexity. One idea was to devote as$.$

$1.$Do a long cycle analysis on the Concept Design Services case. Hint use the applicable theories of Strategic reconciaiation $($Market Vs OPERATIONS$),$ Capacity strategy and Trade offs

$2.$ Recommend the course of action the CEO should take $?$