J. Hvidtved Larsen A/S (JHL) is located in Silkeborg and manufactures sewer cleaning vehicles. Through a number of years, JHL has exported its sewer cleaning vehicles to Russia through a Russian distributor. The export to Russia has increased substantially, making JHL considering establishment of local production in the country. From a starting point, the establishment could serve 3 purposes:
- Placing JHL closer to the Russian market
- Lowering production and import costs
- Sending a signal of commitment to Russian customers
As part of the deliberations on production in Russia, JHL outlined a number of questions that the management needed answers to in order to make a qualified decision on the project. The questions asked by the JHL management included:
- What should be manufactured in Russia and what should remain in Denmark?
- Where to locate in Russia?
- What are the costs associated with building or leasing the appropriate production facilities?
- What sub-suppliers are available?
- Are the Russian human resources adequately educated and available and what are the labour costs in Russia compared to Denmark?
- What investments are required to ensure the best possible production set-up?
- And how does the size of investment in Russia compare with the alternative of investing in Denmark to lower production cost in Silkeborg?
- How should the legal set-up be structured?
- What external sources of finance are available and what are their terms of investing in the project?
- What would be a realistic implementation plan?
In short, JHL needed a clear business plan that could be applied to both the internal decision-making, as well as to external investors and stakeholders. JHL did not have the required resources within the company to investigate all the necessary key factors and develop the business plan. The company therefore approached DIBD and collaboration was initiated.
The Global Projects Unit (GP) within DIBD composed a project team consisting of consultants from Copenhagen and the office in Moscow, together with a JHL project manager. Jointly, the key factors were defined and information on these was subsequently gathered through desk and field research in Russia by the GP Russian consultants. In Denmark, the information was processed and converted into a clear strategy and foundation for decision-making for the JHL management.
"We would never have been able to carry out this work ourselves without the GP assistance. It would simply have required too many resources internally. I can only recommend other companies to involve GP, since it provides professional sparring during the project as well as a better gut feeling of whether the idea of production in Russia is good or bad. In other words, the whole project idea becomes much more tangible." Brian Stage, General Manager of JHL.
30 January 2009