Question no 2: In the view of new products, how would you have structured the organization to become a world leader?
SKF Group is world’s largest manufacturer of bearing in the world for the fiscal years of 2007 and 2008 with accumulating revenues of 58.6 billion in the year 2007. The group operates 110 plants in 28 countries with 43000 employees (almost) and is headquartered in Goteborg, Sweden. Though it has a diversified range of products, which divides into three divisions that include automotive, industrial and service, yet 70% of its revenues are being generated by the manufacturing of bearing parts. SKF Group offers a wide variety of offerings that are inclusive of platforms of seals, lubrication and mechatronics. It accumulates 33% of its revenues from its services division and 73% of the service revenues come from non-European subsidies of SKF Group (Donnelly, 2006, 50). Service revenues contribute more than one-fourth of the total SKF Group revenues, which operates at a margin of 10.6% that is lofty compared to the operating margin of the rest two divisions. The service division offers the industrial market a wide variety of bearings along with other products and services; it maintains a worldwide logistics services for both the external customers (outbound logistics) and for the SKF Group owned companies too. It provides its customers with knowledge-based products, systems, and services in order to enhance its plant efficiencies. Moreover, SKF Group has three back-up service units and is equipped with four front-line services along with sales units. A complete value chain diagram of SKF Group is present in the exhibit one that is given below (Hart, C., 1998, 100).
SKF Group has wide customer data base with two million customers worldwide for its 40 industries. The automotive industry is the one with largest customer base. Approximately, 150 moving parts are required per vehicle and SKF Group leads its way to give the customer at least one part in the manufacturing of the end-product. The group has diversified consumer segment that include: beverage, energy, metals, mining, cement, paper etc. and almost all of them incorporate SKF Group’s product offerings with some demanding customized solution while others want a much more less of a standard version of the solutions. Nevertheless, customers demand sustainable products that are energy and environment efficient (Hutt, 2005, 20).
SKF Group has a very integrated value chain network. The actual distribution of parts of the group is being conducted through 7000 distributors of the service division. It also has 3000 industry distributors for its automotive division, which are supported by SKF Group’s own application specialists worldwide. Together with the distributors of the group, it gives its customers value adding services ranging from balancing to wheel alignment and lubrication. Due to this early involvement with distributors, SKF Group is able to rectify any design errors or any potential problem before the product goes in the consumer’s hand. SKF Group certifies its distributors in order to maintain the same value in consumers’ minds, as SKF-maintained partners after training. This helps the group to serve the customer demands while lowering the maintenance costs and total cost of ownership. Hence, the front line sales and service units work in co-ordination and integrity with more or less standard procedures but they work in a way that delivers SKF value to the consumer (Donnelly, 2006, 50).
SKF Group has three back-up service units for marinating its logistics, training and then remanufacturing. Its logistics group serves both the company and customers worldwide. To maintain its logistics efficiency with minimal delays, SKF Group has eight distribution centers around the globe and twenty domestic warehouse hubs in six countries. Moreover, to facilitate its customers it also offers E-business solutions where customer can place order online and have a check along with balance on the delivery status 24/7. Customers can use authorized distributors for maintenance needs even if the product is of other manufacturer. Therefore, logistics services from SKF Group are integrated for manufacturers, suppliers and distributors of durable goods industry-wide (Turnbull, 2006, 90).
The remanufacturing services of SKF Group are also widespread around the globe, offering bearings, not only for industries but also for airways, railways and machine tool spindles (Hofstede, 2005, 60). Furthermore, it has its own Distributor College to keep its distributors up-to-date with respect to the new technological advancements, products and techniques of conducting the business. However, these three back-up units operate under standard operating procedures. Most of the customers believe that the accessibility for SKF Group parts are great as it is not difficult to discover what is required for the distinctive application fields and that the collection is incredible...........................................
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