The Hungarian plant employed a staggering 900 people, which made up 15% of the organization’s entire workforce. Given the low costs of operation and the favorable tax rate, the plant would realize yearly savings of DKK75 million before tax. The plant outperformed its Danish counterparts in quality levels, revenue increased and profit margins expanded. Thus the Hungary plant is performing at an above satisfactory level, moreover, further relocation of some development activities is projected for the future. Estimates now predict that Coloplast would double its product volumes by 2010 and expand further into other foreign markets such as China.
Why are standardization and structured interfaces so important among the value-chain activities?
A value chain by definition is a chain of interdependent activities. At each level, the value chain gives the products more added values. Since the activities of the value chain are so interlinked there definitely should be standardization and structured interfaces that fine-tune the processes and maintain quality levels across the board. Through this uniform engineering or technical specifications, criteria, methods, processes, or practices deeply rooted in the organization as a whole are established.
What determined the configuration of Coloplast’s global value chain?
There exist costs in other parts of the value chain. The distribution setup is placed in Hamburg, North Germany. Through this, the Danish products are distributed across Europe including central European countries. However, in Hungary, extra costs would have to be incurred due to the transportation of the goods first to Hamburg and then back to the central European countries. This would affect the global value chain of the organization.