BSI Analyzed

Production Decisions
Based on the 255 industries that battled each other between 2005 and 2011 in the Best Strategy Invitational. Here you get more information about the production facilities; there location, their capacity and more. Senior Partner, Pattyn Frdric

BSI Analyzed

METHODOLOGY The Best Strategy Invitational has been around for a couple of years now. This is the game where Industry Champions from all over the world battle it out to become Grand Champion. Throughout the many years this international competition has been played, there were 255 industries, with each one winner over the period of 2005 and 2011. Year 2011 2010 2009 2008 2007 2006 2005 # industries May/April August 11 9 15 7 33 14 27 13 15 20 10 255

December 6 7 14 20 22 12

For this paper, the decisions of each winner of each industry have taken into account. That makes that the population is 255 Grand Champions. The main documents that have been used are the footwear industry reports of year 20 of each industry that can be found on www.bsg-online.com. The needed data has been imported into excel where statistics did the rest. When talking about the amount of produced pairs of shoes; all graphs are x1000. TOPIC: PRODUCTION One of the most important decisions the managers need to take is; where are we going to produce our shoes and how much? This is important because the whole industry starts with 2 plants; one in NA ( capacity of 2.000.000 pairs ) and one in AP ( capacity of 4.000.000 pairs ). Why is this important? Well because this has an impact the future production cost of your shoes, the possibility to shield your company from elevating exchange rates and import/export taxes, the efficiency of your distribution, all of this taken into account will determine of you can hold your ground while fighting for market share.

How many plants should I own?

This question in fact depends on your strategy: specializing in one or two facilities, or diversifying your activities in 3 or 4 facilities. The only thing I can stay is: the average is 2.65 plants.

What to do with your plant in NA?

In general there are 3 possibilities; sticking to the status quo, selling it, boosting it up to be your main production facility. When analyzing the figures, its clear that most great players see the plan in NA as a financial burden. This can be concluded by the observation that 50% liquidates his assets there.
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But what can be said about the Grand Champions that decided after all to stick with their plant there?

11% 35% > 8000 3000-8000 <3000 54%

11% of them considers their NA plant their core business because they increase the capacity of it to nearly the maximum (<8000), furthermore, the capacity of this plant surpasses always the capacity of the other locations. Most of them (54%), increase the capacity of their plant, but, nearly never favor this facility to be their number one production site. Somewhat more than a third, prefer the status quo.

Of all players that kept their facilities in NA, the average production capacity is 4.200.000 pairs, this means they doubled their capacity over the 10 year.

What to do with your plant in AP?

Besides your starting plant in NA, you have a newer, more efficient one in Asia as well. What to do with that plant. Well, the figures are clear: you would be an idiot to sell it. Each and every Grand Champion has kept his plant and tried to make it a goldmine.

20% >8000 4000-8000 26% 54% <4000

Its clear that most of them (54%) try to maximize the inherent potential of this plant and using it for economies of scale. More than a quarter of the population does in fact try to expand the capacity of this plant to support their future or current production needs. For me the strangest observation is the fact that 1 out of 5 Grand Champions thinks its a good idea to not only stand with a status quo, but even go further and sell a part of his plant

When checking the average size of the AP plant, we can say without any doubt that it is by far the most important plant of all with its 7.800.000 pairs. This means that, on average, that here as well, the capacity of the plants has doubled up throughout the year. Furthermore, this plant provides 50% of all the needed shoes for the company because the average size of the whole production capacity of the population is 14.800.000 pairs.
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What about setting up new production plants?

When checking both possibilities for setting up new production plants, you always need to check if your actions are in line with your strategy, if you need help with that we are always there to help you: www.bsgconsultancy.com . When checking the stats on EA, we see that nearly half ( 41% ) of them bought assets over there, but never with an higher capacity of 8.000.000 pairs. On average, the plants can produce up to 3.700.000 pairs. Which is more or less the same amount of production done by the NA plant. The story for LA is much nicer; 75% of the Grand Champions have bought assets over there with an average capacity of 4.500.000 pairs. What is even more than NA and EA. Somewhat short of 10%, there are even Grand Champions that have made this plant their leading manufacturer of their shoes! More interesting is that nearly all of them have succeeded in developing a decent size plant in LA to make sure that they can reap the benefits of economics of scale (76%). Other winners have chosen to build a plant with a smaller capacity, this mainly for exchange rate and distribution purposes. ( For more information, contact us. )

17%

7% >8000 3000-8000 <3000 76%

How does the worldwide production look like?

If we just take the location into account where they produce their shoes, the graph below shows the answer:

19% 28% 15%

NA EA AP LA

38%

This means that 38% of all production facilities available over 255 industries are located in AP. As mentioned before, this means that everyone has a plant over there. This graph might not be that interesting therefore, check out the same graph, but taken into account the capacity of shoes that getting produced in each demographic region:
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LA 23%

NA 14% EA 10%

AP 53%

The main observation here is that, more than half of the world wide producing of shoes originates from AP. But maybe the most stunning one is the fact that both LA and NA surpasses the production capacity of EA, which was in fact already present when starting out with the game. Be aware of the fact that even LA, which can be considered a low cost production plant, produces the equivalent capacity of NA and EA together, although this plant needs to be build and developed throughout the upcoming year.

Need help defining your strategy, or improve the efficiency of your plants? Dont hesitate to contact us: BsgConsultancy@hotmail.com or Join us:

www.BsgConsultancy.com
We are looking forward doing business with you, and coaching you and your team to victory!

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Senior Partner, Pattyn Frdric

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Pattyn Frdric Industry Champion 2008, University College Ghent 2nd place Best Strategy Invitational with All about the money! click here
EHSAL Management School: Project management, CAPM University Ghent : Teaching degree, applied and public administration University College Ghent: * Msc in applied business administration, Strategic management * Bsc in business administration, Business & Economics Risk and finance management Strategic management

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