Where in the World Is TIMBUK2 - Case Study Example

?In 1986 Kevin Bacon stared as Jack Casey, in the movie, “Quicksilver”.  Jack had dropped out of the corporate world and became a bike messenger.  The movie glamorized his fellow messengers as colorful, anti-establishment, nonconformists, who had “an irreverent attitude toward motor vehicles and traffic control signals.”(1)  The bike messengers used “messenger bags”, usually constructed of durable canvas and rugged waterproof construction.  Through the 1980’s manufacturers of these bags popped up in many major metropolitan areas, and soon the demand for these bags grew beyond the ranks of the bicycle messengers.  While messenger bags have their roots dating back to the late 1970’s, and belonging to a subculture of an unruly working class, they have, over time, become a popular fashion accessory.  The general appeal of the messenger bag stems from its working-class heritage, its carry-all utility, and its rugged, waterproof construction–plus its affiliation with the urban bicycle messenger subculture.(1) In 1989 a San Francisco messenger founded Timbuc2 with nothing more than an old sewing machine and some creative ideas.  His plan was to compete with the lucrative “day pack” market using a messenger bag that combined well tested durability and urban appeal.  By 1994, Timbuc2 had established a well defined market niche that combined San Francisco appeal and a custom made, internet based “Build Your Own Bag” product.  Timbuk2s concept is rugged and stylish. The timbuk2 website describes Rob’s goal, “to make a messenger bag rugged enough for real bicycle messengers, yet stylish enough to appeal to a broader market of young, hip urbanites as an alternative to the traditional two-strap day pack. Our catchy name, three-panel design, distinctive ‘swirl’ logo, and the fact that we’re ‘Made in San Francisco’ added to our cachet.” I believe that Timbuk2 got their “foot in the door” with the messenger bag and captured an exploding market trend. San Francisco being the birthplace of the messenger trend and supposedly the most hard core riding environment gives the company credibility and edge. In my opinion, the key competitive dimensions driving sales for the messenger bags are quality, delivery speed, ability to cope with changes in demand, flexibility and new product introduction speed. The Quality Guarantee Timbuk2 offers is extremely generous and screams confidence. The company encourages customers that these bags “wear like hell”(paper on timbuk2). The “2-3 shipping days” policy for a custom made bag is evidence of the company’s delivery speed competitive dimension. This is extremely fast turnaround time for a fairly big corporation and proves this company has a fine tuned operation with close management, further solidifying the quality of its products. Timbuk2’s Brennan Mulligan focused on “Lean manufacturing” and “Mass customization” (paper). He determined that emphasizing on waste elimination and improving quality, he was able to accomplish smaller batch sizes. Once batch sizes as small as one bag, were achieved, Timbuk2 would be able to meet and cope with changes in demand. With lots of hard work and the acquisition of more machines, Timbuk2 accomplished this. We can accredit Timbuk2s final competitive dimensions, flexibility and new product introduction speed, to small batch sizes as well. Timbuk2 found cells of 5 workers, each one seeing a bag from start to completion, to be most efficient. This system ensured detailed attention to each bag, and whether or not a bag was a new design, the process would remain nearly the same. In my opinion, the competitive priorities for the bags manufactured in China, appear the same, however in reality the manufacturing process is pretty different. I feel that Timbuk2 has already captured a reputation with the concepts they emphasize, “Rugged and Stylish”, “hardcore”, “designed by messengers and made in San Francisco”. People already see this image when they hear Timbuk2. Some dye hard fans may interpret the extension to manufacturing in China as weak or “selling out”, however on closer inspection they will realize that the bags they love are still being made in San Francisco, and that messengers are still designing these bags in San Francisco, so not much will actually change. The company will still be adhering to its main concepts, with the same Quality Guarantee, in addition to expanding into a market that more people can afford. The bags that will be made in China will be much more generic (not as individualized), but with the same hardcore fabrication and durability, and even more features. The second competitive dimension the San Francisco factory has is delivery speed. The China based operation will not be as fast in initial creation and delivery, however, since these bags are not made to order, Timbuk2 will have these in stock and will be able to deliver orders just as fast as the custom made bags. (An example of how the China operation will appear to be making the bags in 2-3 days, but actually will have them pre-made and stored). The China based operation will be able to cope with changes in demand, but like a slow moving train changing tracks, the time frame will be a bit more of an implication. The China operations flexibility and new product introduction speed, will suffer compared to San Francisco, however Chinas operation will have the new competitive dimension of Cost effectiveness and competitive pricing, as well as a more complex product to offer. The assembly line in China may look something like the cheese factory Lucy worked at in her early 20’s (I love Lucy). I imagine a large warehouse with conveyor belts and expensive machinery. I imagine many lightly skilled employees. I expect the factory is able to handle large amounts of volume and has a high rate of production. I assume the factory has some automations, however since one of the competitive advantages to manufacturing overseas is the low hourly wage of the employees, I expect it still has many workers. I believe the amount of raw material on hand is high, since the production of finished goods is high. In March 2002, Timbuk2 was shipping 200 bags per day out of San Francisco, and had 40 employees (25 of which were in production). (paper) Ironically enough most of the production workers were Asian women. The skill required for workers was/ is very high in San Francisco. Each employee must be trained to do each and every part of the production, compared to the China operation where each employee is probably set to one assigned task, repeated all day everyday. I believe San Francisco has a low level of automation. There are machines, but these machines must be run by people. The level of raw materials in San Francisco would be substantially lower than in China, however in a larger variety due to the custom options, simply because less is being produced. Finally as far as finished goods inventory in San Francisco, there is little to none, since all custom jobs are shipped directly after completion. In conclusion, Timbuk2 sells more than 30 products today. The new bags being manufactured in China are just some of those products. I don’t believe that the location of these new products being made has much to do with the concept Timbuk2 represents. Rugged, Stylish, hard core, and local. In my opinion Timbuk2 still excells 100% in meeting these criteria. The same quality guarantee applies, they still suggest you “beat the hell out of the products”, and they are still being made locally. Timbuk2 is just additionally appealing to a broader market. It has been said that without the expansion to china, the San Francisco operation would cease to exist. “That change alone saved our San Francisco factory from going out of business.” Says Mark Dwight Timbuk2s president and CFO (future of business). “As a result of its higher sales volumes the company has expanded the San Francisco factory. Doubled its production staff, and added employees in all departments.” Nothing has been taken away from the long standing company; on the contrary the current San Francisco operation has been made bigger. The only other potential cost I see associated with manufacturing in China, is the possible reputation decline. But, as long as Timbuk2 emphasisizes that they, as a company, have not changed, and the only way to stay “afloat” was to expand, then I would say the benefits out weigh the costs. China Operation Raw material received in China > Manufacturing > Finished goods bags > Distribution Inventory v < San Francisco Operation Online orders > Raw materials > manufacturing > Finished goods > Transportation v ^ < Orders from Timbuk2 store ^ Orders from other retail stores Cachon, G., Cattani, K. & Netessine, S.(2007) Where in the world is Timbuk2? Outsourcing, Offshoring, and Mass Customization. Gitman, L. J., & McDaniel, C. (2007) The future of business. The essentials. South-Western Cengage Learning Mason Ohio Pg.90 Porter, M. E. (1998) Competitive Strategy. Techniques for Analysing Industries and Competitors. New York, NY The Free Press Sarket, Pia (2004, Nov 9) Facing economic reality. Popular S. F. messenger bag firm finds cheaper labor overseas. SFgate.com Article collections pages 1-4 Timbuc2, A Brief History of the Messenger Bag”  http://myweb.ncku.edu.tw/~jeng/doc/pom/chap002.pdf Operations Strategy & competitiveness chapter 2 Read More