Timbuk2 Case Study Analysis Essay
The business crafts bags which are fashionable, durable, appropriately priced and can be easily cleaned. The business is well known for its customizing solutions and delivers orders on committed time and with accurate specifications.
Timbuk2 Case Study Analysis
Timbuk2 (2010) acknowledged that Aka De Martini started selling messenger bags in late 1970s to assist telephone linemen. Later on NYC bicycle messengers and Manhattan Pottage were introduced. In 1989 Mr. Rob Honeycutt made 50 handlebar bags which were sold in a cycle shop. However non-messengers raised lots of queries and Mr. Rob came up with Scumbags but it lacks credibility. Mr. Rob got enthused by a well known ‘Indie Band’ and an illustrious African city and established Timbuk2. The business got a major assignment from Oregon. Throughout 1990s Mr. Rob specifically highlighted the importance of build-to-order production system. In 1991 ‘SWIRL’ logo was introduced. The business started mass customization along with lean manufacturing. Later on the business further expanded in laptop, IPod cases, Totes and many more.
Today, the corporation focuses on creating urban escapades by providing good looking and tough quality bags. It is purely a market driven organization which really cares about its customers and tries to create a bond with them. It specifically focuses on bicycle messenger bags and creatively introduced tri-color and three panel bags. Some of the latest developments include ‘Pro-series’ and ‘Bag in a Box’ which has further unwrapped customize options.
Q.1 Consider the two categories of products that Timbuk2 makes and sells. For the custom messenger bag, what are the key competitive dimensions that are driving sales? Are their competitive priorities different for the new laptop bags sources in China?
Ans. Two broad categories comprises of messenger bags and laptop bags. The business sells array of innovative and creative design in both the categories. It continuously takes customers feedback and tries to incorporate changes to further enhance key features related to portability, safety and protection. Messenger bags resemble advanced craftsmanship where customers can make choice from diversified colors. The design feature take into consideration key elements like placement of buckle, strap and it even highlights safety measures for riding during nighttime. One can easily organize all the suppliers and can orderly maintain office supplies, documents as well as digital devices. Due to its tested quality it has become well known overnight. The viewers can easily visualize price tags and choose among the most affordable and best quality products.
The messenger bags are available in classic and mini formats. Several premium designs are also introduced but they are available in limited edition. For Laptops there are notebook cases, laptop cases, backpacks and more prominently customize options as well.
Customers can easily customize products related to both the categories. It took Mr. Rob less than a year to introduce the system commercially.
Competitive Dimension for custom messenger bags:
The firm has gained competitive edge over major competitors like Caddy, Chronicles and many more. They mainly targeted at the emotional level resembling to unique, authentic, energetic and stylish factors and tried to connect with new customers while improving relationships with the existing customers. Some of the cutthroat facts are as follows:
· The customization option gives more flexibility to customers
· The messenger bags are everlasting and durable which involves best quality raw material and delivers world class quality to customers
· The business illustrates reliability and responsiveness where orders are man-made and delivered within two days.
The brief analyses of laptop bags outsourced in China reveals that it has a different target market. The business must have a model separated from customization as well as from individuality. It does not include the same street cred as in the case of messenger bags. Therefore Timbuk2 must emphasize on mass production rather than customization in the case of China laptop bags.
Q.2 Compare the assembly line in China to that in San Francisco along the following dimensions; (1) volume or rate of production, (2) required skill of the workers, (3) level of automation, and (4) amount of raw materials and finished goods inventory.
Ans. Enright (2005) acknowledged that prior to going into e-commerce, the business used to sell finest bags at whole sale price to retailers specifically REI. E-Commerce provided them an opportunity and the firm was available to sell retail price directly to customers through Timbuk2.com. The corporation has corporate channels as well which sells bags with dedicated logos to business customers. A separate channel caters for special deals where profit margin remains low. These all channels depend on pricing strategy and delivery time. E-commerce orders are given priority because they have to be delivered within two days hence more labor got utilized. It was found that it incurred the same cost as it was with the traditional model. More importantly the business found that major textile players shifted towards China. China came up with the liberalization policy where tax break was provided and FDI was highly promoted.
Chief comparison for producing a bag in China vs. San Francisco is as follows:
· Volume or rate of production: China is more efficient and it is able to deliver more quantity at low price since wage rate is low.
· Required Skills of Workers: The productivity of Chinese worker is low whereas San Francisco labor is more skillful.
· Level of automation: Level of automation is high in China. Nevertheless the design and presentation requires best quality craftsmanship. Most of the Timbuk2 bags are handmade and reflects the beauty and the finest quality which cannot be achieved through automation and machineries. Although China is most appropriate for mass production of bags. However customize bags require skills, crafting ability and hand work.
· Amount of raw material and finished goods inventory: The business requires cheap raw material and must opt for minimizing finished goods inventory. Manufacturing customized bags is much cheaper in San Francisco. More importantly China does not provide material advantage because most of the important material comes from Far East. Furthermore shipping cost has an impact on the overall cost. In order to ship bags from China to San Francisco through ocean carrier it costs $ 0.10 per bag and takes 4-6 weeks to reach the premise. In case of air frightened an individual bag incurs $15 transportation cost and it takes 2-3 days to reach San Francisco. It further incurs an outbound domestic freight cost of $3 per bag.
Notice: See Exhibit 1 in the Attachment Part
Q.3 Draw two diagrams, one depicting the supply chain for those products sourced in China and the other depicting the bags produced in San Francisco. Show all the major steps, including raw material, manufacturing, finished goods, distribution inventory, and transportation. Other than manufacturing cost, what other costs should Timbuk2 consider when making the sourcing decision?
Ans. Market Wire (2010) explained that Timbuk2 has streamlined the entire supply chain with the on-demand retail analytics. Key suppliers make instant decision related to growth while utilizing business intelligence solutions for designs as well. They perform in direct link with craft men and key designers of the firm and look for customer preferences. The state-of-art ERP (enterprise resource planning) system facilitates in serving both Business-to-Business and Business-to- Customer clients. It directly communicates with the third part warehousing facility and IT resource department and as a result customers receives immense and less time consuming output as per their requirements.
The top management plays an important role in synchronizing the entire assembly line, so that production can take place more efficiently and effectively. Recently it went through reengineering and indentified inadequately utilized labor resources specifically concerning to middle man and sent them to sewing line. It adopted the Toyota Sewing System to perform operations and project management in an outclass manner. Timbuk2 continuously motivates and encourages its employees at the assembly line to learn new skills. Knowledge management also plays an important role. They take feedback from employees, purchasing is done on weekly basis in order to reduce inventory and wastage cost and employees contribute a lot in generating new ideas. They continuously to efficiently utilize supply chain management so that value requirement can be met in an excellent manner. Throughout the value chain implication of TQM (total quality management) plays a significant role while approaching zero defect philosophy is also considered as an important paradigm.
Notice: See Figure 1 and 2 in the Attachment Part
The business must consider all the important attributes in the case of outsourcing. Other than the manufacturing cost, it must look into the following factors:
Once finished bags are produced it must consider efficient transport system so that goods can be supplied to the distribution centers.
Distribution cost is also an important factor.
In order to create a proper check and balance top management need to travel to China on regular basis there travelling and accommodation cost must be included.
Further the business needs to provide training to suppliers and new workers as well and it will also incur certain amount of cost.
There must be going to be a certain communication medium and it will also cost the business.
There will be expenses pertaining to management performing in China along with office and manufacturing facility rent.
It might incur time and energy cost while searching for suppliers, premises and building collaborative or alliance relationship with them.
Business needs to understand specific factor while entering into China. People in China believe in long-term relationship and they never speak to a new person. Therefore GUANXI plays an important role. One must look for friends in China who can perform as an intermediary between the two parties.
Custom facilitation is an important part and tariff and duties should be given considerations.
Cost for leasing of factory is also an important part.
Timbuk2 specializes in its business and opted for diversification within the core business. It has understood key features, benefits and usage criteria and surpasses the customer expectations. The demeanor remains with continuous learning approach and the organization strategically opted for the opportunities. It has opted for the holistic approach. The business went through critique and came up with the customization option which reflects the successful performance worldwide. The web consortium has reduced the cost factor to such an extent and it contributes a lot to the profit margin. The firm has learnt from the past experience and invests a lot in key business operations to attain long-term benefits. The market driven strategy has enabled them to critically understand both direct and indirect competitors, the entire competitive arena, potential markets and customers. It is strategically formulated the entire supply chain as well the distribution network. It also convoluted the fine understanding of customer attitudes and behavior and utilizes the key finding to further improve the organizational performance. The organization is in the favor of sustainable development and performs recycling in an environmental friendly manner. It provides equal opportunity to both the genders and pays fairly to its employees. The keys fact stated that it has remained successful due to continuous innovation and product line expansion with a lot of investment in improving quality and providing comfort.
Timbuk2. (2010). Timbuk2. Retrieved July 16, 2010, from http://www.timbuk2.com/tb2/products/home
Enright, M. J. (2005). China’s exports: An unstoppable competitor?. Retrieved July 16, 2010, from http://docs.google.com/viewer?a=v&q=cache:YLTpyf94wegJ:cachon-terwiesch.net/2e/sample_cases/Timbuk2.pdf+the+entire+supply+chain+management+of+Timbuk2&hl=en&gl=pk&pid=bl&srcid=ADGEESgwZafjiJ0R2FNXXjfVQ_HWFmQ1ijeLIGTM-dJkD1Vcwy5aPMTuVug2oTeOAwu0sME39reVpJJ0QbdKcOQLSfSJHZRyTgOOzzM6xLN8DrGkxwJAyeLJGxJCke9x9YFSEXsOYobX&sig=AHIEtbRQweOMaf0EKzNTDm6iGDE537hZyQ
Market Wire. (2010). Timbuk2 Has Business Insights in the Bag with Pivot Link. Retrieved July 16, 2010,from http://www.marketwire.com/press-release/Timbuk2-Has-Business-Insights-in-the-Bag-With-PivotLink-1259101.htm
Jacob, F. R., Chase, R. B. & Aquilano, N. J. (2009). Operations and Supply Chain Management. New York City, NY: Mc Graw Hill.
Exhibit 1. Comparison of important cost related factors in San Francisco and China
Figure1: Supply Chain for those products outsourced from China
Figure 2. Supply Chain for bags produced in San Francisco