Leitax Case

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How did the rapid maturing of the digital camera marketplace affect Leitax's supply chain challenges and opportunities?

Improved technology and reduction in price made the digital camera industry grow rapidly and inject life into a very stagnant sector. Worldwide sales growth rate for the digital cameras had double digit growth for almost 15 years. However that growth was slowing and was starting to reverse from a strong 25% in 2005 to a weak 5.2% in 2006 and into negative territory 2007 and beyond. This growth masked the problems in Leitax's supply chain.

Other external factors magnifying Leitax's supply chain challenges was that digital camera technology over the last 15 years had grown dramatically to the point where the lifecycle of a camera became so short many people waited for the next model to come out.

Internally, Leitax had processes in place that would extend products beyond their lifecycle and end-of-life (EOL) dates based on deals that the sales team would arrange with various resellers. These problems came to a head when at the end of 2002, there were three camera models that suffered because of poor planning.

What happened to its product portfolio mix and different trajectories of products within the portfolio/ and what happened to its supply chain as the industry lifecycle surged and contracted in an accelerated manner?

According to the case "Leitax maintained eight camera models in its product portfolio offering a broad optical zoom range, mega pixel resolution and internal memory capacity." On top of that it "each model could have multiple SKU's based on such variables as bundled accessories and geographic and promotional packages". This made for a massive combination of product choices in which to manage especially when consumer choice is fickle and the product lifecycle was shortening all the time. In fact, the average life of a digital camera product was about 17-22 months and high-end products were shorter than that and it was getting worse the more advanced the technology became.

This was masked by the growth of the market in the past few years. Suddenly the market growth was reversing and it made the supply chain problems all the more apparent. The cracks in the armor were really starting to show at the end of 2002 with the planning issues they had with their three camera models. With one outsold, one delayed and a third not selling, it was like striking out in one swing. Their compensation to extend the life of the existing model was a mistake compounded by those customers who were waiting for the delayed product to arrive.

The bottom line is that products needed to have better supply chain procedures and most importantly must have an end-of-life and stick to it. This is what the ‘Redesign Project' was designed to do.

Was there a good fit between the physical supply chain network- e.g. configuration and location of factories, distribution centers, etc- and its major customer markets? Use case study narrative data and tables in appendix to address this question.

As it stood in 2002, the fit between the physical supply chain network was terrible. It was separated into three geographical regions – the Americas, EMEA and APAC. There was one distribution center available for each region while production was far away in other countries. Adding insult to injury, Leitax maintained eight camera models that were a mix of zoom, megapixel and memory features. This meant multiple SKU's in regions that might not need them. It seemed like no one was studying their markets and what customers were asking for. In Exhibit 2, Leitax's market share distribution held a combined 85% of the market in the U.S. and EMEA (63 and 21 percent, respectively). This mean three things: keeping distribution and production centers, better market research and more accurate financial forecasting. The ‘Redesign Project' was created to fix some of these problems.

How did the concept of demand forecasting...
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