BUSINESS DEVELOPMENT
–
FROM PRODUCT TO SOLUTION
Catarina BojessonDepartment of Industrial Management and Logistics, Lund University, Faculty of Engineering
SE-221 00 Lund, Sweden
This article is based on a master thesis written in 2009 at Lund Institute of Technology, in cooperation with the company Kalmar Industries. The purpose of the thesis was to create an understanding of Kalmar Industries’ market within the paper segment based on customer needs and then to propose the appropriate way for the company to meet the opportunities identified. The work is based on two case studies.
Background
Kalmar Industries is part of Cargotec Corporation and a global supplier of container handling solutions and heavy mobile materials handling equipment used in ports, terminals and intermodal facilities. Every fourth movement of a container or trailer worldwide is handled by a machine from Kalmar Industries.
Because of the high pace and low margins in the industry today, high demands are put on efficient logistics. Material flow must always act without delay or interruption. Kalmar Industries continuously update the product portfolio in Industrial Management and has developed unique solutions for various industries. Within the paper industry, handling of paper rolls place high demands on equipment and requires special lifting equipment and skilled drivers.
In recent years, Kalmar has received an increased number of requests and indications from the market concerning automated solutions in the industry. In the paper industry this is mainly caused by the increased costs in the customer's key processes that
possibly could be reduced by fully automated solutions. However, there is currently no clear view of the market potential and therefore a need of further analysis. The problem situation is divided into two main areas: What are the needs and wishes of the customers? How should the offer, based on identified opportunities, be formulated to meet customer requirements and what requirements will this put on the organization?
Purpose
The purpose of this thesis is to create an understanding of Kalmar Industries’ market within the paper segment based on customer needs and then to propose the appropriate way for Kalmar Industries to meet the opportunities identified.
Methodology
The thesis is based on studies of both descriptive and exploratory nature. Processing, analysis and
discussion have been completed both explanatory and problem-solving since the aim is to produce new strategy proposals.
The choice of inquiry approach is a case study where the interest lies in deeper understanding and not in drawing statistical conclusions. However, different case studies are compared in order to identify differences and similarities, which is considered appropriate when the studied cases have similar conditions.
Qualitative, primary data was collected through visits and interviews with semi-structured nature carried out at two different paper mills, Nymölla bruk, Stora Enso and Hylte bruk, Stora Enso. The selection of units of study was based on established customer relations with Kalmar Industries. Interviewees were selected specifically for this area so that respondents would possess high knowledge on the subject, thus providing a good tracking performance. Information has also been gathered from literature and other secondary sources.
Results and conclusions
Development towards automated solutions in the paper industry has already begun and a strategy for this is therefore a necessity to defend the market position. The main reason for customers to implement automated material handling is that the costs would be reduced. The reduction of costs is a result of the elimination of human errors which results in elimination of salaries as well as increased quality, efficiency and productivity. In order to compete in the industry for automated material handling systems, knowledge of both material handling equipment and automation is required. The supplier of an automated solution is also expected to be stable and preferably with an existing relationship with the customer since knowledge and understanding of customer processes are necessary. Automation of material handling is interesting for both handling of paper rolls and pallets, but plants with production and handling of paper rolls are especially interesting since it is where the highest expected return of investment is.
The definition of an integrated solution includes that the solution must be tailored to each customer which means that there must be an understanding of
the customer's specific use and requirements. In general, the variations that can occur between different customers' demands for a system solution depends on the complexity of the material flow. The higher the complexity is the more difficult it becomes to produce an optimal automated solution.
Product attributes that are important for all customers includes that the system offers an accuracy that is proven better than manual handling, that a high security can be maintained and that the change can be implemented in a way that does as little impact as possible on the daily operations. Due to the extent of the change work it is essential that project management and training is provided, and that the implementation can be done during ongoing operation, appropriately in stages. Even after the implementation phase, there must be a good backup.
When the customers have new technical requirements concerning materials handling, the suppliers need new technology strategies. With changing technology strategies a direct consequence is new demands in business strategy and organizational design as the organization’s areas business strategy, organizational design and technology all affect each other.
Within the organization Kalmar Industries has the resources and skills needed to cope with the change in the market segment paper even though some of these resources have not previously been used for that market. Kalmar Industries has a global service organization and experience of the service strategy that is required for the new kind of automated solution. The biggest change is that technology that has not previously been used for products targeted to the paper industry will be part of the new solution. Overall, Kalmar Industries has the strategic and organizational characteristics required to manage the changes taking place within the market segment.
Recommendations
The changes in the market segment of the paper industry shows that it is a necessity for Kalmar Industries to provide automated material handling solutions to be able to continue competing for the customers in the segment.
Since the greatest return on investment is for plants with production and handling of paper rolls, material handling solutions for these facilities should be a priority.
Kalmar Industries has the resources and skills necessary to be an independent system supplier. However, some internal development and reorganization of the resources is required. If the company would choose to sell the systems in conjunction with a complementary company, Kalmar Industries should preferably be the company responsible to the customer. The customers have expressed that the relationship with only one supplier is requested. Kalmar Industries, with its strong brand, already has a large customer confidence concerning material handling.
Discussion
The market is defined as "the place where supply and demand meets."For all industrial markets the selling organization is affected by new demand
from the buying organization.This can apply both to new requirements based directly in changes for
the buyer as well as new obligations on the buyer from his own customers.
Organizations that have been entirely product-focused may due to changes in the market have difficulties in competing only with the product when competitors move forward in the value chain with an offer that includes a growing service content.
Changes in a market segment where demand goes from one product to solutions involving new technology strategies will also influence and place new demands on the organization's strategic capabilities, concerning both business strategy and organizational design.It is therefore essential that there is an understanding within the organization for how changes in one of these areas directly affect the others.
Acknowledgements
Many thanks to everyone who has been involved in the process of this project, especially my supervisors, Andreas Nilsson from Kalmar
3
Business strategy
Organizational
design
Technology
strategy
Figure 1:Illustration of the organization's overlapping areas business strategy, technology strategy and organizational design
Industries and Ingela Elofsson from Lund Institute of Technology, who contributed with valuable help and dedication during this work.
References
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Interviews
Ivarsson, Peter (Director Product Line Light). Kalmar Industries. Personal communication 2009. Jönsson, Anders (Manager Distribution). Nymölla bruk, Stora Enso. Interview 2009-05-08.
Nilsson, Andreas (Market Analyst). Kalmar Industries. Personal communication 2009.
Snygg, Joakim (Warehouse technichian) & Ögren, Hans-Erik (Production Manager). Hylte bruk, Stora Enso. Interview 2008-06-02. Internet www.cargotec.com www.kalmarind.com www.storaenso.com Other
Internal presentation material. Kalmar Industries. 2008-12-03.
Intranet. Kalmar Industries. 2009.
