Offshore vs. In House Production: ECCO Shoes

This report discusses the strategic steps taken by ECCO Shoes to focus on off shore production and reduce production costs. It explores the benefits of off shore manufacturing, including cost effectiveness and supplier power. The report also examines ECCO's value chain, which is spread across multiple countries, and the impact of doubling compensation on the company.

OFFSHORE VS. IN HOUSE PRODUCTION:
ECCO SHOES

Table of Contents
About ECCO....................................................................................................................................3
Benefits of Off Shore Manufacturing..............................................................................................4
Cost effectiveness........................................................................................................................4
In House vs. Overseas Manufacturing.........................................................................................4
Impact of Doubling the Compensation............................................................................................5
References........................................................................................................................................6

Introduction
The success lies in the fact that it has its own production technology with which the company
assures quality along with complete control over the value chain. The company has seen a
tremendous move from cow to shoe. This report has reflected the strategic steps which ECCO
took in its footwear business.
About ECCO
ECCO has been a success and the only footwear brand among the competitors who manufacture
and sell retail product. As the company developed it faced threats from the international
competitors, to curb the same, ECCO took a strategic step of focusing principally on the
production and tanning not from the host country, but offshore to the other countries which are
low cost in order to reduce the production cost. This off shore production has proved to be a
distinct advantage to the ECCO of its competitors. The major competitors include, Clarks,
Timberland and Geox. Few indirect competitors include, Adidas and Nike. However, ECCO
cannot be considered as a branded marketer since, it does not majorly focuses on international
branding tin comparison to brands such as Clarks.
Source: http://www.academia.edu/16134504/ECCO_Shoes_The_Machine_Gun

However, the company currently following the offshore production and manufacturing of each of
their product, according to the operations management and profitability, the current strategic
program seems fit for ECCO, for the fact that the company does not brand its products in other
markets; therefore, the market presence is less in comparison to the other brands. This in turn
reduces the revenue and further the profitability. Therefore, to stay sustainable, the company
must focus on the quality products.
Benefits of Off Shore Manufacturing
Cost effectiveness
Offshoring has proven to be cost effective because it allows the manufacturer to work with the
cheap and talented labor in different markets. It saves money and therefore enhances the
profitability (Remoteresouces., 2017). In today’s scenario a lot of companies are turning to
offshore production to attract technical support. However, before they can set up there are
political and cultural issues to deal with. The other side of the story states that procuring and
manufacturing in the other countries make the product cheap for the people in that country,
thereby benefitting the company in terms of reduced cost, to customers, as they get product at a
cheaper price and also provide work opportunity to the people in that country (Tatano et al. 2012,
66-75)
In House vs. Overseas Manufacturing
The off shore production also benefits the company in terms of the supplier power. The company
has multiple suppliers at each place to procure the items from, thereby reducing the supplier
power. This also helps them earn economies of scale (Longman 2017)
ECCO is known for manufacturing casual category footwear having Nike a large competitor to
fight against with. However, the offshore production helped the ECCO to fight against it. The in
production helped it maintain the quality of their shoes. Therefore, making it difficult for the
competitors to create similar light weight shoes as ECCO without having to change the
production team (Longman 2017).

The value chain for ECCO is spread over many countries, but home country. They are working
their production in the Netherlands, Indonesia and Thailand. The company has sales in 90
markets across the Globe. For the leather they utilize, they need millions of cows, it makes it
easy for them to procure the best quality while working with their manufacturing units in
multiple countries. They gain expertise from the Netherlands. The company has their research
center in Denmark. Therefore, the ECCO is Denmark’s most successful brand (Blesch, 2014).
The attention is given to the quality and product reliability in ECCO. In order to achieve this
company needs to produce the shoes as per the customer specification, while producing in one
market and selling the same in 90 markets across the globe will be difficult. This way the
company will not be able to cater the demand of such high market also; producing in house will
affect the supplier power, reducing the profitability by tremendously increasing the cost. The
current value chain provides them the flexibility to alter the production as per the customer
specification for high quality and customer satisfaction (Proff 2011, 16-35). Asia provides the
labor at reduced cost; therefore, the majority of the manufacturing is located in there.
The Portuguese market is high in technological advancements; therefore, the company uses
Portuguese technology (Adolfo. 2015). The employees are continuously trained in the Danish
training centers to increase teamwork, commitment and producing high quality product.
However, the company lacks the benefit of lead time, the lead time is high due to the offshore
production to curb this issue, and the company needs to either install a production unit in Russia
or to reduce the 3-4 week transportation time from Asia. Currently, in order to overcome this, the
company has taken a strategic move by opening a production facility unit in Slovakia, not only at
par production the facility here is also made to serve to create extra capacity, which helps
reducing the delay risk (Adnan et al. 2014, 134-138).
Impact of Doubling the Compensation
The workers therefore, are experts in their own processes, thereby increasing the effectiveness
and efficiency (Modgil, Sharma and Singh 2013, 816-831) the doubled compensation along with
marketing the product in other countries such as India will enhance the internal and external
customer satisfaction.

Conclusion
With off shore production not only, the cost is reduced, the risk is also spread across; the
company’s production units are specialized in the task they perform. Now in the end, it could be
inferred that offshore production company could easily reduce the risk and strengthen the
business outcomes effectively.

References
Adnan, A., A. Cazan, M. Safa, A. W. M. Lung, and S. Muppala. 2014. "The application of
theory of constraints in manufacturing outsourcing: a case study." International Journal of
Enhanced Research in Science Technology & Engineering 3, no. 4: 134-138.
Adolfo. Roger., (2015). Case analysis ECCO shoes Accessed November 10
http://www.academia.edu/16134504/ECCO_Shoes_The_Machine_Gun#.
Longman, Nye. 2017. “How ECCO Shoes built an innovative supply chain”. Supply Chain.
Accessed November 10, https://www.supplychaindigital.com/company/how-ecco-shoes-built-
innovative-supply-chain#.
Modgil, Vikas, S. K. Sharma, and Jagtar Singh. 2013. "Performance modeling and availability
analysis of shoe upper manufacturing unit." International Journal of Quality & Reliability
Management 30, no. 8: 816-831.
Proff, Heike. 2011. "Where differentiating automobile manufacturers go wrong: strategic
challenges posed by increased outsourcing." International Journal of Automotive Technology
and Management 11, no. 1: 16-35.
Remoteresouces., (2017). Offshoring: The advantages Vs. Disadvantages Accessed November
10https://www.remoteresources.com/offshoring-the-advantages-vs-disavantages/#.
Tatano, Fabio, Nadia Acerbi, Chiara Monterubbiano, Silvia Pretelli, Lucia Tombari, and Filippo
Mangani. 2012. "Shoe manufacturing wastes: Characterisation of properties and recovery
options." Resources, Conservation and Recycling 66: 66-75.