Leitax Case Study

Introduction:

Newplex, a $22 billion print and imaging company, which was founded in the 1970s formed Leitax, a digital camera division in 1997. Leitax first launched a point and shoot megapixel digital camera called the LX-280 Zoom, priced under $1000. By 1998, a quality digital camera could be purchased for less than $300, however the quality was not good enough for printing. The market continued to grow, camera technology continued to evolve and by 2003 digital cameras were outselling film cameras. The market was becoming saturated and the worldwide growth rate for digital cameras began to plummet. In 2004, the digital camera market in the US was up to $8 billion and the camera shipments to the US increased by 36% from 2003. Within a firm, forecast generation and sharing is used by managers to guide the distribution of resources (Antle and Eppen, 1985; Stein, 1997) this was not being done in Leitax.

Analysis

It can be seen from the result of FY 2002 and FY 2004 that company strategy was not aligned. The planning system prior to the redesign project was disjointed and each interested function was focused on their own objective as opposed to a Leitax company strategy. A lack of supply chain coordination caused a bullwhip effect when the finance department pressured the sales department to meet targets, which then caused the sales department to overestimate sales (Chopra et al, 2013). Exhibit 6 shows that statistical forecasts were not taken into consideration in Q2 by all functions and efficient, timely sharing of information and assumptions continued the bullwhip effect (Chopra et al, 2013).

In April 2004, Leitax launched the ShootXL which became a best-selling digital camera which was launched at a cost of $729. Optix-R was launched in September 2004 after being manufactured in China at a reduced cost and sold for $459 as a follow up and more affordable camera to the ShootXL. Again, disconnect occurred within the company when warnings from DMS (Demand management services) group indicated possible cannibalisation of the ShootXL by the Optix-R which resulted in 3% of lifetime volume materials cost obsolescence write-off of the ShootXL.

The SF6000 model was launched into the market as a high-end customer market, a niche product aimed as a “tool for serious photographers”. The product was praised by enthusiasts and therefore a very high price for a niche market was set. Leitax allowed the enthusiasts and press to have too much of an influence on the price point which lead to a bottom up approach being used by the company which proved to be over enthusiastic.

Evaluation

Senior managers and supply chain managers should be aware that forecasts are inaccurate, long term forecasts are less accurate than short-term forecasts and aggregate forecasts are usually more accurate than disaggregate