Essay about Timbuk2 Case

1482 Words Dec 13th, 2015 6 Pages
Timbuk2: Outsourcing, Offshoring and Mass Customization

Introduction:

Timbuk2 was founded in 1989 by Rob Honeycutt, a San Francisco bike messenger. Honeycutt wanted to develop a messenger bag that was rugged enough for everyday wear and tear, but chic enough to set a fashion trend. The company founded its success based on its lean manufacturing and mass customization principles. With many of the American companies now outsourcing their manufacturing processes to China, it became hard for Timbuk2 executives to ignore the labor cost benefits that Chinese manufacturing would provide. Dealing with different channels (wholesale/retailers, e-commerce, etc), Timbuk2 also had to find a way to improve their mass customization processes and
…show more content…
However, the question becomes how many different choices to offer its customers without increases costs too significantly? One must consider the different possible combinations for their products that a customer can choose from and determine whether or not they should add more options. Given the fact that Timbuk2 already offers different types of bags (laptops, messengers, totes, backpacks, or accessories) , different sizes (small, medium and large), different colors, patterns (almost 60 different ones) and different design panels (left, right,and main) [1], one could easily conclude that a customer has more than a million different customization options they can choose from. Although added variety will lead to added-value proposition for its customers, it can also hinder quality of the product and may cause errors within the manufacturing process leading to higher labor costs.

Outsourcing to China:

Table 4 of the case shows the revenue, variable production and shipment cost per bag by location (see Appendix A). Appendix B shows the cost differentials between San Francisco and Chinese manufacturing. These calculations clearly show that manufacturing in China will provide a profit margin of $26.92 ($45.08 {table 1 from case} - $18.16 {from calculations}), whereas, the San Francisco manufacturing will provide a profit margin of only $17.29 ($45.08 - $27.71) due to its higher labor costs. Since the orders made in China will have

Related Documents