For the custom bag produced in San Francisco – certainly quality is a competitive dimension. They have a great reputation for both design quality and process quality. The bags are custom designed with input from the customer, assembled and sewn in San Francisco and offer outstanding durability. The durability is an integral part of the marketing and the bag is said to outlast jobs and even relationships. They also pride themselves on their delivery speed. The bag is usually received within 2 days of the order being placed (this also is reflective of the competitive dimension of delivery reliability).
It seems like the decision to outsource the bag to China is based on the competitive advantage of cost. The investment in the equipment that would be needed to make the new bag, which is much more complex than the original messenger bag, would be very high. The labor costs that would be added to the San Francisco operation would drive the price of the bag up past the point that they believe customers would be willing to pay. If they can maintain the quality levels with the oversight program they have designed, they may preserve the current competitive dimension of quality. They will, however, be making a trade off with delivery speed and delivery reliability with the product coming from China and increasing shipping times.
Compare the assembly line in China to that in San Francisco along with the following dimensions: (1) volume or rate of production (2) required skill of the workers (3) level of automation (4) amount of raw materials and finished goods inventory.
The case doesn’t give a lot of information on this, but I would assume the volume and rate of production in San Francisco would be lower than...