The National Bicycle Industrial Company: Implementing a Strategy of Mass-Customization

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OPERATIONS MANAGEMENT

THE NATIONAL BICYCLE INDUSTRIAL COMPANY: IMPLEMENTING A STRATEGY OF MASS-CUSTOMIZATION

Anindito Prabowo (0848005)
Vidya Narayani(0848073)
Muhammad Adly Yusrizal(0848055)
Rogier De Roy

MAGISTER MANAGEMENT
GADJAH MADA UNIVERSITY
YOGYAKARTA
2008

COMPANY BACKGROUND
NBIC was Japan's second largest manufacturer of bicycles in 1992 with sales reaching about X20 billion. The firm marketed bicycles under three different brand names, Panasonic, National and Hikari. NBIC targeted each brand at a unique market segment, and together the three brands covered the wide spectrum of bicycles sold in Japan. They ranged from high quality, high price sports and fashion bicycles (Panasonic) to bicycles that were used primarily for transportation from home to the nearest train station or supermarket and back (Hikari). National and Hikari brands together constituted the bulk of NBIC's production and sales. Panasonic, the company's more expensive line, accounted for a little less than 20% of total production in 1992. NBIC began to manufacture and sell bicycles in 1952. At first growth in sales was slow, but picked up rapidly within a few years after the firm's inception. Between 1952 and 1965, the firm produced almost a million bicycles. in 1965, due to ever increasing demand the firm completed the construction of a new factory in Kashihara city on the outskirts of Osaka, and moved its operations to this factory (see Appendix A for a brief outline of the company history). At Kashihara city the firm had two factories located next to each other. NSIC's management called them the mass production factory and custom-factory. The custom-factory, initially conceptualized as a pilot plant, was built in 1987. In 1992 according to published estimates, the firm produced a combined total of 700,000 bicycles in these two factories. Over 90% of these were produced in the mass production factory and shipped to Matsushita's sales subsidiaries. High-end Panasonic bicycles were produced in the custom-factory and shipped to dealers to be delivered to individual customers. While most line workers worked at the mass production factory, a few of NBIC's best skilled workers produced bicycles at the custom-factory. Operating on a single-shift basis throughout the year, they produced a small fraction of the firm's production at this factory. In early 1993, the firm employed 470 people with a little over 66% classified as direct or line workers and the rest as indirect workers. A little over 50% of indirect workers were in the production engineering and design departments of the firm. The line workers belonged to the company union and actively participated in "quality circle" programs. Workers met once a month, as part of these programs, to discuss quality and safety issues. Additionally, management periodically tested line workers and ranked them according to their skill level. The highest skilled workers were given the opportunity to work at the custom-factory where wages were higher. NBIC "sold" its bicycles to 10 sales companies. These sales companies distributed bicycles to approximately 9,000 retailers located throughout Japan that were part of the Matsushita group. Regular monthly meetings were held between management at NBIC and the sales companies to discuss sales trends and manufacturing concerns.

MASS-CUSTOMIZATION STRATEGY
The Genesis
The original idea for making custom-made bicycles came from the firm's President. He a famous department store in Osaka. He noticed that women could custom order dresses that where then delivered by the store in two weeks. He wondered if it was possible for National to produce bicycles in this way. The bicycle industry was in the doldrums, demand was sluggish and the average unit price the customer was willing to pay for a "standard" bicycle was dropping. Though the average price of a sporting bicycle was increasing, this segment was not growing as...
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