Case: The Tao of Timbuk2*

"Timbuk2 is more than a bag. It's more than a brand. Tim-buk2 is a bond. To its owner, a Timbuk2 bag is a dependable, everyday companion. We see fierce, emotional attachments form between Timbuk2 customers and their bags all the time. A well-worn Timbuk2 bag has a certain patina-the stains and scars of everyday urban adventures. Many Timbuk2 bags are worn daily for a decade or more, accompanying the owner through all sorts of defining life events. True to our legend of Indestructibility,' it's not uncommon for a Timbuk2 bag to outlive jobs, personal relationships, even pets. This is the Tao of Timbuk2."

What makes Timbuk2 so unique? Visit their Website at www.timbuk2.com and see for yourself. Each bag is custom designed by the customer on their Website. After the customer selects the basic bag configuration and size, colors for each of the various panels are presented; various lines, logos, pockets, and straps are selected so that the bag is tailored to the exact specifications of the customer. A quick click of the mouse and the bag is delivered directly to the customer in only two days. How do they do this?

This San Francisco-based company is known for producing high-quality custom and classic messenger bags direct to customer order. They have a team of approximately 25 hardworking cutters and sewers in their San Francisco plant. Over the years, they have fine-tuned their production line to make it as efficient as possible while producing the highest-quality messenger bags available.

The local manufacturing is focused on the custom messenger bag. For these bags, orders are taken over the Internet. The customers are given many configuration, size, color, pocket, and strap options. The bag is tailored to the exact specifications of the customer on the Timbuk2 assembly line in San Francisco and sent via overnight delivery directly to the customer.

Recently, Timbuk2 has begun making some of its new products in China, which is a concern to some of its longstanding customers. The company argues that it has designed its new products to provide the best possible features, quality, and value at reasonable prices and stresses that these new products are designed in San Francisco. Timbuk2 argues that the new bags are much more complex to build and require substantially more labor and a variety of very expensive machines to produce. They argue that the San Francisco factory labor cost alone would make the retail price absurdly high. After researching a dozen factories in China, Timbuk2 found one that it thinks is up to the task of producing these new bags. Much as in San Francisco, the China factory employs a team of hardworking craftspeople who earn good wages and an honest living. Timbuk2 visits the China factory every four to eight weeks to ensure superior quality standards and working conditions.

On the Timbuk2 Website, the company argues they are the same hardworking group of bag fanatics designing and making great bags, and supporting our local community and increasingly competitive global market. The company reports that demand is still strong for the custom messenger bags made in San Francisco and that the new laptop bags sourced from China are receiving rave reviews. The additional business is allowing them to hire more people in all departments at the San Francisco headquarters-creating even more jobs locally.

Required:

• Consider the two categories of products that Timbuk2 to makes and sells. For the custom messenger bag, what are the key competitive dimensions that are driving sales? Are their competitive priorities different for the new laptop bags sourced in China?

• Compare the assembly line in China to that in San Francisco along the following dimensions: (1) volume or rate of production, (2) required skill of the workers, (3) level of automation, and (4) amount of raw material and finished goods inventory.

• Draw two diagrams, one depicting the supply chain for those projects sourced in China and the other depicting the bags purchased in San Francisco. Show all the major steps, including raw material, manufacturing, finished goods, distribution inventory, and transportation. Other than manufacturing costs, what other course should Timbuk2 consider when making the sourcing decision?