Coloplast Global Sourcing

Executive Summary

Coloplast founded in 1957 is a Denmark based international firm that manufactures medical devices. They specialize in five business areas, continence care and ostonomy products which are under the chronic care division. The wound care, breast care and skin health care products and they fall under the strategic business units. Company’s mission is to be the best in their business area and contribute to a better quality of life. In year 2005, more than 97 percent of the company’s revenue came from sales outside of Denmark with 81 percent from Europe and the remaining 13 percent from Americas. Coloplast has manufacturing plants in Denmark, Germany, Hungry, the United States, Costa Rica and China.

Due to changes in health care system by many European countries, Coloplast decided to improve productivity and efficiency. They undertook a strategy that involved increasing production efficiency and effectiveness. First step that they took towards achieving their goal was offshoring part of their production to Hungry. It was the first time that Coloplast ever took a relocation process to a low cost production area. Production costs were expected to be 20 percent less than Danish levels. There were several challenges that were experienced during the production offshoring process to Hungry. In this paper we will analyze all these challenges and make our recommendation how they can be avoided going forward.

Issues Identification

There were several issues that Coloplast faced during relocation production to Hungry. One of the main challenges that they faced was Organization structure. Prior to offshoring production, Coloplast was a decentralized organization. They had six different plants in Denmark and all were within half an hour drive from each other. All these plants believed that their way of organizing production was unique and couldn’t be change. Due to decentralized structure there was no proper documentation on production...