Product cost reduction

Nobia conscientiously works to capitalise on economies of scale and reduce product costs. This primarily requires continued efforts to increase harmonisation of the product range and enhance the efficiency of production. Fewer business units offer better conditions for increasing co-ordination of both product lines and production.

Product costs correspond to approximately two thirds of Nobia’s sales. These costs are reduced through economies of scale by utilising Nobia’s size to offer customers competitive products under separate brands, price classes and in many different sales channels.

Harmonising components

Nobia has grown organically and through acquisitions. The latter entails that the Nobia Group is responsible for a range of input goods that can be streamlined by eliminating minor differences. Harmonising components reduces product costs while an increasingly large sector of Nobia’s total product range becomes available to all business units. Standardising input goods does not mean that the range will be uniform. Design and variation will ensure that the various brands do not lose their distinctive characters or level of quality.

An increasingly large percentage of Nobia’s carcasses now have the Group-wide standard, K20, and the range of such products as appliances and worktops has been gradually harmonised. The harmonisation process is complex and time-consuming. To enhance the efficiency of the process, responsibility has been divided between three clusters of high harmonisation potential:
• all business units in the Nordic region
• UK, France and one business unit in Germany
• Austria and a second business unit in Germany

At the same time, certain products, such as chipboard and appliances, will remain the same for the entire Group.

Larger manufacturing units and fewer suppliers

When decisions are made on Nobia’s product range, a make-or-buy analysis is performed to determine whether it is most cost-efficient to purchase the product from external suppliers or manufacture it internally. If products are to be purchased, the procedure is co-ordinated within the Group as described above, meaning that the number of suppliers is gradually reduced.

Production is highly capital-intensive. This is the reason why component production is increasingly concentrated to fewer units. Many of these units have developed lean manufacturing techniques, with systematic flow and process improvements designed to boost efficiency. The Group-wide standard for carcasses, K 20, is fundamental to the process of enhancing efficiency and co-ordinating production. In a bid to generate additional economies of scale in production and enhance capacity utilisation in our assembly plants, Nobia has begun concentrating its assembly operations to fewer and larger units.

Flexible purchasing organisation: increased presence in China

The aim of achieving economies of scale enhances the importance of purchasing from low-cost countries. Nobia seeks out suppliers that offer the best combination of price, quality and delivery reliability. All purchases are made according to Nobia’s standards, which are described in the Sustainability section.

Nobia established a purchasing organisation in China during the year and received the first deliveries. Goods from Asia currently account for only a small percentage of Nobia’s total purchasing volumes, however work is progressing on expanding this organisation.