Business_Studies_Crumpler_Case_Study

Role of Operations Management * The aim of Crumpler is to clearly differentiate the business’s products from its competitors rather than using a cost leadership strategy. * Differentiation through operations has been achieved through: * Better quality product * Vast variety of products in its range to suit individual customers * More features and versatile applications * Incorporation of new technology * Clever design. * Operations must supply a product that has the features and quality consumer’s demands as well as reliably distributing this product to the market. Influences on Crumpler Operations * Crumpler Australia’s export sales are currently estimated at around $6 million, approximately 50% of sales overall. * Retail stores are in: * North America * Europe * Asia Pacific Region * Globalisation has also meant that Crumpler can outsource its manufacturing and now has a global supply chain. Costs of operations have significantly fallen as overseas manufacturers have access to cheaper material and labour outputs. Economic * There are several economic influences on the business. These include the rising cost of oil, general economic conditions across North America and Asia, and the rising cost of labour across Asia. Technology * Originally all production was done by hand – now the business has incorporated CAD and CAM. Technology became a crucial element of the business as competition increased. * B2B communication using email allows Crumpler headquarters to keep in touch with its manufacturing contacts in Asia, as well as retailers world-wide. Design and Manufacturing Processes * All products are designed in-house in Melbourne, from concept through to prototype. These are then sent on to manufacturers who then send back a quota. * Crumpler feels that finding manufacturing partners who understand the brand is an important part of the business. * Crumpler believes that the first and foremost criterion for their design team is strength and practicality. * Crumpler rarely sees products come back for repairs Quality Expectations * Quality, versatility and durability were key features desired by consumers to protect fragile electronic devices such as laptops and cameras. * Although more expensive than other similar bags, customers equate price with quality and are obviously satisfied with the product as sales have increased each year the business has been in operation. The Crumpler brand is now associated with tough, versatile bags that last for years, making them a good investment. Competition * Many of Crumpler’s competitors cannot match the quality of its bags and focus on threatening Crumpler’s market share with lower cost options. * These ‘generic’ products are typically made using lesser quality nylon and only have basic features. * Crumpler's closest competition are: Lowepro, Tamrac and Northface – as all brands focus on quality and durability. * Crumpler does not attempt to compete with premium brand such as Louis Vuitton. Social and Environmental Sustainability * Crumpler acts in a socially responsible manner by ensuring the durability of its products. Many competitors’ products have a built in obsolescence without any repair value. This makes it necessary to purchase additional bags, which consumes more resources. * Crumpler is an ethical business; however a possible problem with factories in Vietnam is that Crumpler does not run them directly. * Crumpler acknowledges a responsibility to be aware of the conditions and enforce a code of conduct to improve them. One option could be to set up an independent monitor to ensure the code of conduct is followed. Operations Processes Inputs * Materials * Crumpler’s bags are water resistant to a high degree, and are made out of materials that are super strong, lightweight, durable and resistant to fraying, tearing and ripping. * Information * Extensive data for the design specifications for every model of bag ever produced by Crumpler is kept in readily accessible files. * Customers * Crumpler encourages feedback from its customers. Ultimately, the business aims to meet the specific requirements of its customers. * Human Resources * The creative talents of the design team are the key human resource inputs. * Facilities * The design studio of the business is located in Ballarat and the major warehouse is located in Melbourne. Transformation Processes * Crumpler is no different to other businesses in that its operations is strongly influenced by the 4V’s – Volume, Variety, Variation in demand, and Visibility (customer contact). * Being a small company, Crumpler aims to produce nearly a million bags per year. * In the early years of the business, the owners quickly realised that its Australian-based operations would not keep up with demand, nor could it achieve the economies of scale needed to reduce operations costs and hence maximise profits. * Of the 4V’s, variety is the most significant influence. Crumpler need to be able to produce a variety of styles and models for its product. * Crumpler uses a batch-type production method. Only a few hundred of each specific bag is produced but batch production enable the business to produce a variety of styles and sizes. * The operations process can be interrupted and adjustments made to add a different variety of bag to the production line. * In addition – if a particular bag exceeds demand forecast then it’s a relatively easy process for management to email the specifications into the new production system to produce a new batch of 1000 new bags. Sequencing and Scheduling: * Clear sequencing and clever scheduling ensures that Crumpler can have its new products available for customers to purchase. Task analysis is particularly important for each individual product to determine the most efficient way to make each. Outputs * Crumpler offers an extensive range of bags – each model has a variety of styles and sizes. * There is a service component as well to Crumpler’s output such that there is a 70:30 mix of goods and services, whereas customers who purchase competitors’ products must do so without any assistance or service advice. Customer Service * Crumpler also differentiates itself from its competitors by providing a high level of customer service at the point of sale and with any customer questions or issue after the sale. * Crumpler bags are distributed through its branded retailers. Store managers are well informed of all Crumpler’s range of and can translate customer wants into finding the most suitable Crumpler product. In addition, Crumpler offers extensive after-sales service through its outlets and website. It has a no-questions-asked policy when dealing with repairs or replacements, although a customer may be asked to pay for repairs caused by abnormal use. Warranties * Crumpler stands by its quality claims. In addition to any statutory warranty, which protects consumers from defective materials or workmanship, Crumpler provides a lifetime warrant on zippers etc. The business calls this its ‘Til Death Do Us Part’ Warranty. Operations Strategy Performance Objectives * Of all the performance objectives – quality, speed, dependability, customisation, flexibility and cost. Quality is the most important to Crumpler. * Allows for a sustainable competitive advantage. * Speed of operations can be increase with technology such as CAD, CAM, robotics, and JIT inventory management. * Speed of delivery is important for Crumpler to get bags from the warehouse to retailers. * Dependability is the reliability of the product or service. Crumpler’s products are designed and made to the quality standard expected by customers. * Crumpler has a strong reputation for dependability because their products always deliver what its marketing promises. * There is also dependability in delivery or supply. * Crumpler does not need to customise its products because they are so versatile. A customer has the option to change the internal configuration of their bag by moving, adding or removing dividers where they are merely attached with Velcro. - Clever design feature that was one of the unique attractions of the product that competitors were not able to offer. * Crumpler’s manufacturers require more flexibility of operations than traditional process assembly lines. * They will need to switch to a new model or variation of a good to meet a change in the market or changes in customer wants. * There is also flexibility in volume. * Crumpler needs manufacturers who have excess capacity or the ability to increase the volume of output as it continues to experience rapid global growth in the demand for its bags. * There is a risk that demand will outstrip supply and Crumpler will experience a stock-out in its stores for some models and variations. New Product Design and Development * Crumpler is constantly improving its existing products and developing new bags for electronic appliances. * Crumpler is keen to make improvements to its existing products. * Further improvements involved using zippers coated with water repellent. Customer feedback has allowed the product to change to suit with customer demands. * Crumpler is also branching out into other sectors of the bag market. The business is now focusing on designing a range of handbags and luggage. * With this change – there will have to be changes made to the equipment and technology used in the business. Supply Chain Management * Supply chain management and logistics has not been on the business’ strengths. * Much of this area of the business has been outsourced to allow for further concentration on design. * As there is a lack of control, costs tend to rise. * The company is developing strategies to improve its supply chain management in the areas of: * Setting accurate production targets for its suppliers * Speeding up the delivery of products * Storage of inputs at the Melbourne site * Planning current inventory levels with forecasts in demand from customers. * Managing damaged and returned goods * With more global operations and less direct control over manufacturing and delivery to overseas-based warehouses and retailers Crumpler is considering outsourcing this function to a specialist supply chain solutions firm. Outsourcing * The company sourced manufacturers in Korea and Vietnam, where the majority of bags are now made, although a small number are still manufactured in Melbourne. * Although Vietnam has at times a reputation for breaching international labour standards, Crumpler stresses that it will not use suppliers that exploit labour, particularly children. Vietnam was chosen for quality and reliable supply rather than cost-cutting. Technology * The technology that Crumpler uses is not new. * Crumpler’s technology is tried and proven rather than cutting edge. However, the design team heavily rely on CAD to develop new products. * CUTPLAN is used to identify all material inputs, their size, etc. – These are then emailed to the production factory. Also minimises waste. Inventory Management System * To keep track of what stock is kept at the warehouse, what is available in retail outlets, and what stock is due for delivery requires accuracy through using IT. * Each product is given a unique identifying barcode, which is scanned each time the product reaches a specific location. This information is stored in a computer database so that any retailer can find out the exact availability and location of a particular model of bag. * This allows a bag to be located if a customer is unable to find at the store. * First in first out (FIFO) is the inventory management system used at Crumpler. * There is the assumption that the first stock that has been purchased and the oldest will be sold first. This prevents old stock building up and potentially becoming obsolete. Quality Management * Crumpler has a performance objective of the highest quality and, therefore, quality control and improvement are essential. Bags are randomly inspected to ensure that they are free from manufacturing defects as a form of quality control. However, Crumpler relies heavily on the quality control and quality assurance systems used by the factories it outsources to. These factories must be certificated with ISO 9002, which indicates quality assurance in manufacturing. * Crumpler aims for zero defects in the products it offers for sale. Change at Crumpler * Change at Crumpler was concerned with the decision to outsource manufacturing. The business is principally a design and marketing company today. * A driving force for Crumpler is to be debt free at all times. Global Factors Global Sourcing * Crumpler obtains its inputs from the Asia Pacific Region. Economies of Scale * Crumpler makes close to a million units a year and by increasing its capacity through global expansion, significant economies of scale have been achieved. * Manufacturers will drive downs cost as much as they can to offer low production cost to clients. Scanning and Learning * Crumpler scans and monitors the activities of its competitors and developments in the industry by attending travel good and trade shows in the US and Europe. * Unfortunately, Crumpler’s competition can do the same and the business has witnessed a number of copies of its products.