The manufacturing of specific products to China
Timbuk2 was founded in 1989 by Rob Honeycutt, a San Francisco bicycle messenger with an old sewing machine. 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 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 (www. timbuk2. com). Brennan Mulligan joined the firm in 1993 to help Rob implement his vision of lean manufacturing and mass customization of these unique bags.
By 1996, Timbuk2 was selling a variety of bicycle messenger bags and similar products utilizing these operational guidelines. If the company had not implemented lean manufacturing, it would have been impossible to deliver a customized product to a mass market. In the year 2000, Timbuk2 launched its “Build Your Own Bag” website allowing customers to configure bags to their own specifications. By 2002, the company employed 40 people and revenues had grown to greater than $4 million in just a year’s time.
To continue to grow profitably and after extensive research and analysis, Timbuk2 outsourced the manufacturing of specific products to China. Presently, this company has continued to expand, remodel its factories, opened a retail store in San Francisco and is financially thriving in their industry global wide (Cachon, Cattani, and Netessine). There are two categories of products that Timbuk2 makes and sells; high-quality custom bags and classic messenger bags. There are key competitive dimensions that are driving the sales for the custom messenger bag.
These orders are locally manufactured in San Francisco and taken over by the Internet. The customers are given many configurations, sizes, color, pocket, and strap options. The bag is tailored to the exact specifications of the customer on the assembly line and sent by overnight delivery directly to the customer. The competitive priorities are different for the laptop bags sourced in China. These bags are more complex to build and require more labor and a variety of different machines (more expensive) to produce these products.
To keep the prices lower for the consumer, outsourcing the manufacturing of these bags is necessary, though the design was still built in San Francisco. The assembly line in China and San Francisco have similarities and differences when comparing the volume or rate of production, required skill of workers, level of automation, and amount of raw materials and the inventory of finished goods. In San Francisco (Cachon, etc ), Timbuk2 found it most effective to have work cells of 5 employees manufacture bags from start to finish as they filled customer’s orders.
In each cell, each worker would have one bag, which allowed for 5 bags to be in process at the same time. All employees were trained on all tasks to produce a bag so that a “bump-back” process was used to balance the workload. When a worker assigned to the last position finished their bag, which was sending it off to the shipping area, this worker would “bump-back” to the next-to-last position and take over production, wherever the bag was in the process. Read about lean production vs mass production
The person in that position would “bump-back” to the previous person, and so on, until the person at the beginning of the process would go to the order backlog and begin producing the newly ordered bag from the next queue. Multiple channels of this process produced 200 bags a day. Asian women worked these cells and demonstrated speed, dexterity, and accuracy as cutters and sewers.
The only differences noted from China and San Francisco’s assembly line was the hourly wage paid ($12. 50 in S. F. versus $1.25 in China), direct labor content (35 minutes in S. F. versus 45 minutes in China), raw materials availability and costs were the same in both areas, but amount of raw materials and inventory of finished goods was larger in China due to shipping of inventory of large quantity back to San Francisco versus individual shipments immediately upon completion to customers’ homes. Orders were processed monthly in China versus 1-2 days in San Francisco. Besides manufacturing cost, Timbuk2 had other costs to consider when making the sourcing decision.
Some of these include: low cost of labor, other manufacturing expenses such as insurance, equipment maintenance, and warranty, shipment of inventory to San Francisco and then to the customers, cost of materials, visits to China to visit suppliers, setting up a shop, as well as visits to maintain relationships and ensure high quality. The long lead time from China (using ocean shipments) would involve inventory. This would mean holding finished-goods inventory in anticipation of demand. This was against the lean manufacturing approach that Timbuk2 had incorporated in their manufacturing process.
New forecasting skills needed to be incorporated to understand the inventory market so that markdowns and write-offs increased as customer preferences changed (Cachon, etc. ). Timbuk2 dealt with issues regarding the operations in San Francisco and how to continue to be a domestic producer. This was important. After much research and analysis, Timbuk2 moved forward with sourcing in China in 2002. As the Operations Manager of Timbuk2, the management team has utilized and implemented many operational management processes and analysis tools.
This has driven the company to financial success and has lead Timbuk2 to being a strong competitor internationally within the industry. From the inception of the company, lean manufacturing and mass customization were key concepts incorporated into manufacturing of these customized bags. By streamlining product and information flows, improved quality and decreased waste became the outcome. We altered the layout and organization of the factory floor and reduced setups at each step of the manufacturing process.
Information about each order, such as color and add-ons, was printed for each bag to accompany it through the manufacturing process. These raw materials were close by and readily accessible to the worker (Cachon, etc). This kept the inventory to minimal levels and “Just In Time” processes were in place. Productivity measures, analyzing input and output data, assisted us in making the decision whether to outsource or not. We evaluated shipping costs using value density tools. Outsourcing was a positive decision as it has lead to increased revenue and business.
Being an ethical company, we are proud of all of our products and where they are built. We have received rave reviews regarding our travel line, laptop bags, and packs. The additional business has allowed us to hire more people in all departments in our local headquarters of San Francisco. This has created more jobs locally (www. timbuk2. com). Bag recycling is an option that has built loyalty and trust with our customers. Our “eco-conscious” focus keeps us as an order winner which has increased our customer volume. In May of this year, we incorporated PivotLink (Reuters). This was an upgrade to our then, present ERP system.
Our system had a wealth of data, but there wasn’t a way to access, analyze or collaborate on data in a timely fashion. PivotLink, as our enterprise-wide business intelligence platform reduced our dependence on spreadsheets and IT backlog, (saving us 16 hours of worktime per week), has enabled all employees to perform their own analysis of current information, has secured a way of sharing data and collaborating with key stakeholders, is easier to forecast and fulfill customer demand, and provides real-time inventory accuracy which has increased customer satisfaction, repeat orders, and revenue.
We have been able to track sales of special edition and off calendar product launches. There are plenty of opportunities for financial growth. There have been discussions for significant expansion of sales through the wholesale channel, which would involve approaching companies such as CompUSA, Apple, and Dell to offer the possibility of bundling our laptop messenger bag with laptop computers and other computer accessories (Cachon, etc).
