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Value Chain & IT

Transformation at DESKO
Introduction: Canadian Wood Industry

 Canadian wood furniture industry can be divided in three


segments :
• Small Enterprises
• Large Enterprises
• Medium sized Enterprises

 Factors affecting Canadian wood:


• Better designed furniture at low prices
• Custom made furniture solutions
• Environmental friendly furniture
Introduction: Canadian Wood Industry

Canadian Market for Office Furniture


Introduction: Canadian Wood Industry

Canadian Wood Industry Trade


Introduction: DESKO

DESKO’s history
 Created in 1980 to commercialize an exclusive executive desk
(Oak based).
 In less than 20 years, DESKO’s sales reached $20 million
 During 1990 the economic slowdown saw DESKO revenue
come down to 14 million. To surmount this DESKO focused its
selling on 25 large business keys in US and Canada.
 After that its sales became 5 times and revenue reached a
record $30 million.
 To facilitate further growth DESKO decided to improve
efficiency of its several key value chain activities.
 Subsequently, Due to American Crisis and cheap import from
Asia it saw a net loss of $2.2 million.
Introduction: DESKO

DESKO’s Financial Health


DESKO’s Structure & Operations

DESKO

Head Office:
Victoriaville

Manufacturing Facility Manufacturing Facility Manufacturing Facility


@ Victoriaville @ Saint-Hyacinthe @ Mississauga
DESKO’s Structure & Operations

 The company’s activities were divided into ten departments.


1. Research & Development (R&D)
2. Procurement
3. Manufacturing
4. Sales & Marketing
5. Customer Service
6. Logistics & Distribution
7. Credit
8. Finance
9. HR & IT
DESKO’s Structure & Operations

Research & Development


Earlier…..
 R&D department was a team of 9 employees dedicated to
product design. Analyzing new trends and customer needs in
wood office furniture was the hallmark of the department’s
success. DESKO was one of the first Canadian manufacturer
to combine fashionable styling of leather with the warmth of
the wood.
But in recent years…..
 Company switched it’s policies to development of easy-to-
manufacture products (rather than investing in new product
design) in order to better serve growing medium sized
enterprise segment. It resulted into transfer of 6 employees to
production.
DESKO’s Structure & Operations

Manufacturing
 Out of a pool of 190 , 75% of the value of DESKO’s purchase
came from 25% of its suppliers. More than 90% of these
suppliers were located in North America.
 However, company recently signed agreement with dozen
Chinese suppliers of handles and fabrics. But still there is
scope of improvement in procurement processes and non-
value-added tasks can be eliminated. Performance indicators
were still not clear and responsibility sharing was ambiguous.
DESKO still used faxes to place more than 25% of its order s
to suppliers
DESKO’s Structure & Operations

MTO
(Make To Order)
30% of total DESKO’s products,
Materials and component parts had to be
procured on the receipt of customer order

DESKO’s
Manufacturing Strategies

MTS
(Make To Stock)
70% of total DESKO’s products,
Goods are produced on demand forecast,
also known as Assemble to Forecast
DESKO’s Structure & Operations

Manufacturing
 Production lead time was less than 2 weeks for MTS products,
whereas it can reach up to 6 weeks for MTO products.
 Even though MRPII, CAD/CAM, CNC etc. have been adopted
by DESKO in 1990’s, the firm’s investment in such
technologies was still below industry standards.
 Improving MTS and MTO process could reduce lead time by
up to 30% and increase the firm’s flexibility.
 Moreover indicator for assessing the performances of the two
manufacturing processes.
DESKO’s Structure & Operations

Characteristics of DESKO’s Product Family


DESKO’s Structure & Operations

Sales, Marketing & Customer Services


 15 agents and 25 specialized distributors located in three
Canadian provinces (Quebec, Ontario & British Columbia)
and several regions in United States.
 The customer service department was responsible for
receiving and processing orders from agents and specialized
distributors. Though the department was efficient, some
orders got lost.
 Most popular families of product remained the conference
tables and executive desks in the large enterprise and
institutional business segment, and tables in medium sized
ones.
DESKO’s Structure & Operations

Distribution
 Planning used to be done by panel of 3 distribution analysts.
 DESKO had fleet of 20 trucks to deliver finished goods in
Canada and transportation to abroad was outsourced.
 Shipping and delivering activities sometimes lead to wrong or
incomplete shipments.
Finance
 Finance department was responsible for credit, invoicing and
accounting activities.
 However, due to use of two parallel information system, the
process was cumbersome and lacked proper monitoring.
IT at Desco

History
 IT department created in the early years of the company with
the objective to provide basic data services to different
departments
 Turning point for IT department : Entry of David Pitt with
having IT experience at one of the competitors of DESKO.
 Pitt launched numerous initiatives to better serve department
needs and improve perception.
IT at Desco

Implementation of ERP System


 On Pitt’s advice an ERP system was adopted in mid-1990’s
 Efforts made to significantly modify the resource planning
module to fit DESKO’s needs
 Company decided to leverage the internet technologies such
as informational website, intranet, internet tools to place
orders with suppliers
 Customization of ERP remained an unsolved issue and no
plan to transform company’s value chain.
IT at Desco

IT department team structure


 16 people at Head office under direction of Pitt
 Team size had more than doubled in the last five years
 ERP Development (5 people responsible for ERP solutions,
integration)
 Web Development(4 people responsible for Web
technologies, sever, design)
 Help Desk (3 people for IT support for employees)
 Network Management (3 people responsible for intra
network)
 DESKO’s ERP did not support firms R&D dept.
 ERP system was used in parallel with another outdated in-
house application
IT at Desco

Challenges
 ERP system was not well integrated with other information
systems
 Team size had more than doubled in the last five year
 DESKO’s ERP did not support firms R&D department
 ERP system was used in parallel with another outdated in-
house application
 IT department has started to earn some respect in the
perception of other employees
 Collaboration between IT professionals and organization
members was still very limited as the role was managers
was focused on clarifying strategy intent with IT
professionals providing them IT solutions to satisfy needs
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