Leitax Case Analysis
LEITAX CASE ANALYSIS:
QUESTION 1
Digital camera market has enjoyed tremendous growth since it was introduced in the photographic industry. Starting in 1998, price has been falling rapidly. In addition, the development of CMOS allowed digital camera to not only capture professional market, but also enter consumer market. It was estimated that in 2006 forecast would peak with 63% penetration rate for digital cameras in the US. After 2006, the growth rate was expected to fall negative.
Product lives for digital cameras had been shortened. While an average life was between 17 and 22 months, high-end, feature packed products had the shortest life cycle. However, the manufacturing lead-time for digital cameras was long. Taking Leitax for example, its manufacturing lead-time was beyond 13 weeks. Therefore it was very important to have an accurate forecast to avoid costs of write-off and obsolescence and loss of sales.
The growth saturation has brought supply chain challenges to Leitex. The maturing of digital market also meant more product launches and more overlap features of products to be managed. It became harder to achieve accurate forecast. In addition, having expeditious demand and production planning, flexible upside and downside supply, and achieving few holding inventories were more vital as errors can impact financial performance severely and lose its customers.
By the end of 2002, Leitax had bared huge loss through inaccurate forecasts and poor planning of three models. One model was delayed, one model was out of stock, and the third one was having sluggish sales. It was estimated that the cost of delay, the lost sales and excess and obsolescence costs accumulated to $26.5 million.
However the maturing market also brought Leitax an opportunity. With technology development, cost of digital market production was decreasing. While there were more products in the market, many of them could be close substitute of each other. While every company in the
QUESTION 1
Digital camera market has enjoyed tremendous growth since it was introduced in the photographic industry. Starting in 1998, price has been falling rapidly. In addition, the development of CMOS allowed digital camera to not only capture professional market, but also enter consumer market. It was estimated that in 2006 forecast would peak with 63% penetration rate for digital cameras in the US. After 2006, the growth rate was expected to fall negative.
Product lives for digital cameras had been shortened. While an average life was between 17 and 22 months, high-end, feature packed products had the shortest life cycle. However, the manufacturing lead-time for digital cameras was long. Taking Leitax for example, its manufacturing lead-time was beyond 13 weeks. Therefore it was very important to have an accurate forecast to avoid costs of write-off and obsolescence and loss of sales.
The growth saturation has brought supply chain challenges to Leitex. The maturing of digital market also meant more product launches and more overlap features of products to be managed. It became harder to achieve accurate forecast. In addition, having expeditious demand and production planning, flexible upside and downside supply, and achieving few holding inventories were more vital as errors can impact financial performance severely and lose its customers.
By the end of 2002, Leitax had bared huge loss through inaccurate forecasts and poor planning of three models. One model was delayed, one model was out of stock, and the third one was having sluggish sales. It was estimated that the cost of delay, the lost sales and excess and obsolescence costs accumulated to $26.5 million.
However the maturing market also brought Leitax an opportunity. With technology development, cost of digital market production was decreasing. While there were more products in the market, many of them could be close substitute of each other. While every company in the