Timbuk2 Case Analysis
In 1989 Rob Honeycutt, a bicycle messenger in San Francisco, purchased a used sewing machine, fabric and buckles and built his own messenger bag. Rob received so many inquiries from non-messengers that he decides to build other bags just like it and sell them at a local bike shop. Rob’s company was originally named Scumbags, but he felt that it lacked the necessary credibility of a real bag company, so he changed the company name to Timbuk2 after the inspirational African city. (Timeline) Rob’s goal was “to make a messenger bag rugged enough for real bicycle messengers, yet stylish enough to appeal to a broader market of young, hip urbanites… (Cachon, Cattani and Netessine) The company’s simple philosophy is: “create good-looking, tough-as-Hell bags you can truly make your own.” (About Us) In 1993, Honeycutt selected Brennan Mulligan, a recent graduate from the University of California, to assist in the implementation of a lean manufacturing / mass customization concept into the company’s business model. By 1996, Timbuk2 had developed an extremely efficient manufacturing operation, producing a variety of bicycle messenger bags and similar products resulting in many changes to the factory floor. Additional sewing machines were acquired to reduce setup time, factory layout was altered to accommodate small batch sizes, sewing team size was optimized at five members each and a “bump-back” process was implemented to balance the workload. (Gerard Cachon) By 1997, Timbuk2 was producing bags in various batch sizes while maintaining the versatility produce to manufacture multiple sizes, fabric types, colors and options. Leveraging this success, the company created a “Build Your Own Bag” page on its web site in 2000, allowing an additional marketing venue which allowed customers to choose from various colors and options. (Gerard Cachon) At the beginning of 2002, the company consisted of roughly 40 employees responsible for the manufacture and shipping of 200+ bags per day through multiple channels. The company booked over $4 million in sales between March 2001 and February 2002 utilizing a combination of four distinct channels. The domestic and international retail channels experienced the highest volume, selling to retail stores at wholesale prices. The e-commerce channel represented a relatively new concept but was demonstrating commendable potential as it allowed Timbuk2 to sell products directly to customers at retail prices. The corporate channel focused on customizing bags with various corporate logos had proven itself to be only marginally profitable, followed by the final venue (other) that was reserved for special deals at a diminished profit margin. These four channels differed in delivery time as well as price. The E-commerce line boasted a two to three day delivery schedule compared to the domestic and international channel which required two to three weeks; the corporate channel customer was looking at a four to six week delivery schedule. (Gerard Cachon) Like many other manufacturing companies, in 2002, Timbuk2 was faced with the outsourcing question. Could product profitability be increased if production activities were outsourced to China? The issues Timbuk2 anticipated seemed to focus on two primary factors, a drastic change in the supplier relationship as well as long lead times in dealing with an overseas firm. Additionally, if Timbuk2 were to begin sourcing from China, what should it do with operations in San Francisco? Honeycutt stated “Our catchy name, three-panel design, distinctive ‘swirl’ logo, and the fact that we’re ‘Made in San Francisco’ added to our cachet.” (Gerard Cachon). Though profits were important to the Timbuk2 management team, so was maintaining their American heritage. The resounding question remained………..is this the right time to outsource? Pros v. Cons of Ecommerce Strategy
E-commerce, or selling items on-line, was introduced...
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