Fleggaard
Pushing the Boundaries for Customer Service and Operational Efficiency
4 min read
Production in Denmark
April 2012
Outsourcing of jobs has been a high priority on the agenda for several years, and there have seemingly been significant gains to be made by establishing production in low-wage countries such as Eastern Europe and Asia. However, today there are good reasons to look more broadly at the opportunities to both streamline existing production and outsource elements of it. We have met a couple of companies that have chosen to retain their main production in Denmark, while part of the production takes place abroad.
A Number of Advantages of Being in Denmark
Smarter design of production, logistics, and warehouse facilities can, in many cases, contribute just as much to reducing costs as outsourcing, which primarily focuses on reducing costs through lower wages. In this article, we have chosen to take a closer look at a few of the companies that, through change projects and new efficiency measures in production, have found sustainable business cases in continuing main production in Denmark. This is not due to patriotism, but because it provides the best conditions for an optimal interplay between economy, access to markets and labour, and the technology available.
A Number of Advantages of Being in Denmark
The company Dolle, located in Frøstrup, specialises in the production and development of loft ladders. The ladders are typically sold as complete kits for retrofitting. The products are exported to a wide range of countries, primarily in Europe. Even though Dolle’s products are market-leading and of high quality, they have felt pressure from various sides during financial crises. Nevertheless, despite competition from cheaper foreign competitors, they have experienced an increasing volume at the Frøstrup facility and, therefore, a need for increased production capacity.
‘Previously, one might have said that we were in a situation where outsourcing would be a natural response. But we have chosen a different path, where we streamline our production facility and increasingly receive semi-finished products from subcontractors,’ says Lars Torrild, COO at Dolle. He believes there are several advantages to being in Denmark for a company like Dolle. ‘We are closer to our customers and can respond more quickly to their needs, but the primary reason for our decision to focus on our production facility here in Denmark is that we have realised to what extent it is actually possible to streamline it,’ says Lars Torrild.
In cooperation with Langebæk, Dolle has laid out plans for an optimised production setup that not only increases efficiency from the current 70% utilisation to 90% but also provides opportunities to produce more complex ladders.
‘It was necessary for us to think broader than just expanding production capacity. We have many other considerations, such as being able to produce timely and flexibly, and we wouldn’t be able to meet these goals through a potential outsourcing,’ states Lars Torrild. The extensive exercise Dolle has gone through will mean the company can compete with businesses that have lower labour costs and less automated production systems. This has required the company to be open to new technology and methods that have not traditionally been used in the industry.
‘At Langebæk, they think in a more general methodology, and it has been both positive and challenging to think outside the box and seek solutions in entirely different industries,’ says Lars Torrild, COO at Dolle.
New Factory Optimises and Retains Production in Denmark
DISA is an industrial company currently undergoing a similar process. The company has a rich history of producing everything from motorcycles to toys, and in 1960, it moved to its existing location in Herlev. At the same time, DISA acquired a patent for a sand moulding machine, which marked the beginning of a global foundry industry. DISA’s 340 employees in Denmark – and just as many abroad – now develop and produce foundry machines and equipment primarily for the automotive industry.
The Herlev factory was built to meet the current needs around 50 years ago, and it has been expanded in line with changing production needs. The buildings and layout are outdated, with high operational costs, limiting its potential. This has initiated a relocation project to Høje Taastrup, providing entirely new opportunities to optimise production and administration. In the new factory, office space and production space will be reduced by approximately 40%, while administration and production will be integrated into an open building, offering new opportunities to develop relationships within the organisation. A reduction in fixed costs, an optimised layout of production and storage, a focus on core competencies, and the optimisation of administrative processes will reduce production costs and help ensure continued production in Denmark. There is, after all, good access to skills and markets, as well as opportunities for optimisation through automation and logistics improvement.
‘This is a very ambitious project we are working on. We have a strong case for being able to remain profitable in Denmark, by, among other things, reducing throughput time for our assembly processes and pre-processing, and implementing efficiencies in our storage and logistics processes. At the same time, we are working on process improvements across the organisation so that we constantly challenge ourselves to optimise all functions from the sales process to the installation of finished products at customers’ premises. It is easier to do in Denmark than in the Far East, and we believe it is important to keep processes and production close to our development department here in Denmark, while outsourcing less competence-demanding processes,’ says Poul Erik Arre, Global Director of EH&S at DISA.
To anchor the new orientation across the organisation, DISA has launched a change management project called ‘Kys Frøen’ (‘Kiss the Frog’), named after the frogs in a small lake at the new location in Taastrup. The frogs have had a direct impact on the new factory. They are protected, which limited the layout of the factory. The solution was a ‘dent’ in the building, which has made room for both trucks, buildings, and frogs. This has been achieved without compromising the original efficiency goals. DISA has embraced the story of the frogs and the subsequent adjustments as a symbol of the flexibility the company and its employees need to go through. Fifty employees are part of a working group, which, with a frog as their logo, will help the organisation make the necessary leaps.
‘The frog has become a symbol for us of change and of what is required for us to continue being a successful company based in Denmark,’ says Poul Erik Arre.
Profitable Danish Production
Common to both Dolle and DISA is that they are part of international groups, and at first glance, they might seem like candidates to move all production abroad. However, Dolle’s factory in Ukraine is intended to support a more profitable Danish production in the future. This is achieved by manufacturing components in Ukraine that are most cost-effective to produce in a low-wage country, thus obtaining semi-finished products that can be assembled with high technology in Denmark within the framework of a well-organised logistics system. In this way, the company is making the best use of the advantages of producing both in Denmark and abroad.
‘It is a very ambitious project we are working on. We have a strong case for being able to remain profitable in Denmark, by, among other things, reducing throughput time for our assembly processes and pre-processing, and implementing efficiencies in our storage and logistics processes,’ says Poul Erik Arre, Global Director of EH&S at DISA.
