Coloplast A/s - Organizational Challenges in offshoring

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Root cause Analysis:

Organizational structure

Coloplast faces organizational structure challenges due to the large distance which the new production plant is located in relation to the other Danish plants. This challenge has its effects on the control and communication between the management and the Danish plant as well as between the various plants.

The management at Coloplast would have to take measures which will ensure that the overall control and communication of different plants is effective and efficient. The Coloplast management can achieve control through linking all production plants using IT technology as well as organizing frequent meetings between the managers of the different plants and to management. This will enable the management maintain control of Coloplast.

Knowledge management

In this case study, Coloplast faced challenges due to the difference in the organizational cultures of its Hungarian and Danish employees which was affecting production. The management decided to hold a meeting where all employees shared their views and this had prevented conflict from occurring. This was a very effective approach since all employees had a chance to give their opinions and had a chance to understand each other better. It is important to hold regular forums with employees especially in organizations with decentralized structures in order to become aware of the issues facing them and to maintain control over the different facility.

Employee motivation and communication

Employee motivation is very important in any business; increase in motivation towards work would likely increase productivity and profits of the company. Coloplast faced a challenge relating to employee motivation since many employees are resistant to change. This is mostly caused by the fear of loss of jobs, increase in tasks or even demotion of employees. However, by using effective communication, the Coloplast management ensured that all employees had access to information in spite of the relocation and that they were not anxious which would have negatively affected production. This in turn enabled them to cope with the organizational change and maintain their motivation levels as the company realised the number of employees this is going to affect.

Local sourcing

Local sourcing is one of the best ways of minimizing the cost of purchases. One of the most important benefits of local sourcing is that there is a very low transport cost and easy communication. In the case study, Coloplast placed too much emphasis on the managerial aspect of relocation and local sourcing was overlooked and this had a huge effect on the entire company by increasing productivity cost by 60%. This is a significant increase in cost which can also affect the consumer by translating into a significant increase in prices and could also affect the profit of the business.

Alternatives/ Options

Organizational structure

One alternative which Coloplast could have applied in the organizational structure is having a centralized structure. The fact that the overall goal of a firm is centrally planned ensures that each branch or subsidiary works toward the realization of the same. This alternative would have ensured that the production plants located in Hungary and Denmark were properly coordinated and that they all pursued organizational goals.

Knowledge management

The initial plan Coloplast had was to train the Hungarian employees in Denmark but due to issues with labour unions, the Danish employees went to train the Hungarian employees. An alternative to this strategy would have been to hire a consultant or an independent company that engages in professional training of employees. However, weighing this option would have been more expensive for the management. But ensuring consistencies in operation of equipment and other processes would also be very essential in facilitating knowledge management.

Employee motivation and communication

The management ensured they stayed on top of communicating to their employees as this is the only way to boost the motivation levels of employees. Communication was the only way in which the management could ensure that employees were not anxious and opposed the relocation strategy. I didn’t come up with any other alternative which the management could have used regarding this issue.

Local sourcing and distribution

Local sourcing is the only alternative for Coloplast because the purchase of materials from the Danish branch would be more costly than local sourcing. The management of Coloplast should therefore consider an alternative strategy of local sourcing since this would have saved over 60% of the costs incurred when purchasing. Local sourcing would have eliminated the additional cost incurred by every third party or middleman handling the materials and would saved some time too.