Question

Where in the World Is Timbuk2?

Outsourcing, Offshoring, and Mass Customization1Brennan Mulligan paused to admire the San Francisco skyline before entering the leased building that housed all of Timbuk2’s activities, from management to manufacturing (Figure 1). Who would imagine that anyone could profitably manufacture a textile product in San Francisco in 2002? With competition not only from lower-cost centers in the United States but also from China and other places in the Far East, a converted warehouse building in San Francisco was an unlikely location for this manufacturing business. Yet Brenna n was not sure Timbuk2 could continue indefinitely to produce everything in San Francisco. While the pride and satisfaction of producing in San Francisco were ingrained in Timbuk2’s culture, and moving production elsewhere would be a huge change for a small company with local roots, Timbuk2 needed to remain profitable. Hence, Brennan knew there was no easy answer to the question on the table: Should Timbuk2 outsource some (or all) of its production to a Chinese firm?

History and processesTimbuk2 were founded in 1989 by Rob Honeycutt, aSan Francisco bicycle messenger with an old sewing machine. The Timbuk2 Web site (www.timbuk2.com) 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 daypack. Our catchy name, three-panel design, distinctive ‘swirl’ logo, and the fact that we’re ‘Madein San Francisco’ added to our cachet.”

2At one time Timbuk2’s Web site claimed that its bags were “messenger-designed, civilian-approved, and guaranteed to wear like hell.”Early on, Rob became interested in lean manufacturing and mass customization and hired Brennan Mulligan, then a young graduate from the University of California at Berkeley, to take up the cause. Brennan joined the firm in 1993to help Rob implement his vision. Rob and Brennan managed the company for its first seven years. By 2002 the management team included four other guys, who, together with Rob and Brennan, ran the show at Timbuk2. Collegiality and informality characterized the work environment, where shaving and closed-toe shoes were generally optional for the management team. The name of one of their early successful products, “El Ocho,” was born one-night in Mexico when the VP of marketing woke up to find himself in jail “Number Eight.” (The circumstances shall remain undisclosed.)By 1996, Timbuk2 was a smooth-running operation selling a variety of bicycle messenger bags and similar products whose manufacturing process was first characterized by lean manufacturing and then, once leanness was achieved, by mass customization. Brennan reflected on the many changes they had implemented on their path through lean manufacturing and on to mass customization, and the many decisions the team members had to consider. If the company had not pursued lean manufacturing, Brennan believed that it would not have been able to deliver a product customized to a mass market. Lean manufacturing’s emphasis on eliminating waste and improving quality through smaller batch sizes and streamlined product and information flows had been particularly critical. Brennan recalled that the efforts to reduce batch sizes were much more difficult than they had made it sound in business school. After much analysis and experimentation, the team purchased many additional sewing machines, greatly reduced setups at nearly every step of the manufacturing process, and altered the layout and organization of the factory floor in order to handle batch sizes as small as one item. In addition, they altered the process so that the information associated with a specific order, such as colors and add-on options, was available to workers as they worked on individual bags. A customer order was printed for each bag to accompany it through the manufacturing process. Through experimentation, Timbuk2 found that it was most effective to have work cells of five employees manufacture bags from start to finish as they filled individual customer orders. As each cell operated, there would be five bags in the process, one for each worker. Each employee was trained to perform all of the tasks to produce a bag, and a “bump-back” process was used to balance the workload. When the worker assigned to the last position finished her bag (sending it off to the shipping area), she would “bump back” to the next-to-last position and take over production of that bag, wherever it was in the process. The person in that position would then “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 bag associated with the next order in the queue. Brennan was amazed at the dexterity, speed, and accuracy of the cutters and sewers, all of whom were women, mostly of Asian descent. Figures 3-6 in the Appendix show some of the processes and inventory locations at Timbuk2.After Timbuk2 had successfully implemented a relatively lean manufacturing process with batch sizes as small as one, it was in a position to mass-customize bags. Many new issues had to be worked through to implement mass customization, however, including decisions about product offerings, pricing, delivery, and order processing.The decisions about product offering were especially critical. How many choices should the company provide customers? While every bag had three panels that could be customized according to the customer’s choice of colors, how many colors should be allowed? Each additional color meant more fabric to stock. What other options should the company offer? For example,if Timbuk2 offered a bag with a handle, the management team would need to configure the machines and processes and then train the sewers how to make a bag with this option. If they allowed customers the choice of panel size (in addition to color) the issues would be even more complex, in that equipment able to customized pieces of fabric with little setup time was very expensive, among other issues.Timbuk2’s process for determining which choices to offer customers was based on management intuition. Options were added if they seemed relatively straightforward to offer (in the sense that they would be easy to manufacture with processes currently in place and perceived to be attractive to the customer. For example, they would typically offer between 12 and 16 color choices for the material—enough to cover most of the color palette, but still manageable for stocking and managing inventory.A nice feature of mass customization was that the company could temporarily delete a color from the product offering if it was out of stock.By 1997, Timbuk2 was able to produce bags in batches of one with its signature three-panel, tri-color messenger bag design. Bags could be made in multiple sizes, fabrics, and colors, andTimbuk2 was also capable of adding other options to individual bags such as center dividers, reflector tabs, and tails, grab straps (handles), and even a variety of logo colors.In 2000, Timbuk2 launched it's “Build Your Own Bag” page on its Web site (Figure 2), allowing customers to configure and order individual bags to their own specifications. Customers could see the bag they were configuring on the computer screen and experiment with different colors and options. The customer was offered different colors for the three panels at no extra cost, but most other options, such as the alternate logo color, came at a price. Spools of different colored thread were mounted on the machine that embroidered the logo on the bag. The worker would specify which color should go on the bag and the machine would use the thread from the appropriate spool. While producing a bag with the customer’s chosen logo colors cost no more than producing one with the standard logo color, Timbuk2 charged an additional $5 for a non-standard color. “Pure profit,” Brennan remarks, as he noted that many customers chose an

alternate color.By March 2002, Timbuk2 was shipping more than 200 bags per day through multiple channels.

Question

What criteria Timbuk2 should use for selecting which options to

offer in the e-commerce channel? Please discuss the impacts of each of the following options (i.e. a-c) on 1) the order

placement (i.e. the web design that enables consumers’ ordering of the option), 2)manufacturing processes, 3) facility layout, and 4) added value to customers:

a)an added handle;

b)different color logos; and

c)different size panels—means customers can specify panel sizes, which may be non-standard. You need to discuss how each of a), b) and c) affects items 1)—4).

Answer 1

Criteria to be used by Timbuk2 for selecting options to be offered in the e-commerce channels are the sales history of different options, the market trends, customer feedback and preferences in terms of colors and make, pre booked orders based on designs advertised on websites.

The impact of (a) added handle (b) different color logos (c) different size panels

1) The order placement - Added handle will need more details to be included on the website along with image. It will interest customers who are looking for additional features then just basic design. There will be increase in cost and add variety to the product range. The estimated delivery time should be advised to the customer and any additional charges involved.

Different color logos will need to be specified clearly in the order placement and accuracy is required so that the manufacturing is done as per order placed.

Different size panels will need measurements to be included in the website product details and varying costs for each of the design. The estimated time of delivery and cost of delivery should be specified during order placement.

2) Manufacturing processes - The manufacturing process will require additional steps for the added features. The raw materials and the time required should be accordingly calculated for the processes. The costs will be accordingly affected for each of the options.

3) Facility layout - Facility layout will need to be planned accordingly depending on the number of orders for each of the features like added handle, logo colors and size panels so that the assembly can be configured accordingly.

4) Added value to customers - Added handle, different color logos and different panel sizes will provide value to the customers in terms of variety and experience.