Timbuk Case

1. Which channels does Timbuk2 sell through? Rank them from the most profitable to the least profitable?

• E-commerce
• Domestic
• Corporate
• International

1. What are some of the pros and cons of Timbuk2's "Build your own" channel (i.e., its e-commerce channel)?

The pros are

• Products are made upon request which eliminate the forecasting errors.
• They generate more profit
• Customers can have more variety which is more attractive to them

The cons are in the more variety of products, the more training the staff needs to accommodate this variety and the variety of material needed to answer this demand.

1. Estimate the cost of manufacturing a bag in San Francisco and the cost of producing a bag in China.

The cost in San Francisco= Labor cost+ manufacturing overhead + Materials+ other cost+ Shipment=(12.5*35/60) + 0.4*(12.5*35/60) + 13 + 1.5 + 3 = 27.7$

The cost of Production in China w/o Shipping from china to SF= (1.25*45/60) + 0.4*(1.25*45/60) + 13 + 0.75 + 3 = 18.1$

Cost of shipping         from china to SF =0.1 or 15 by air freight so total cost for production in China is 18.2 or 33.1

1. Should Timbuk2 pursue the option of manufacturing in China? If so, what challenges are they likely to face and what changes will they need to make? In particular, think about the utilization of the San Francisco factory before and after outsourcing as well as about inventory needs.

The cost of production in China is much less than the one in San Francisco. Therefore manufacturing in China would be a good option if it was managed well. The first concern was the lead time for customers however this can be solved by creating a warehouse in SF and creating an order up to model to manage inventory and reduce lead time from China.

Of course this will affect the e-commerce model and the lead time for these orders however this can be managed by setting extra cost on the orders where the customer is in hurry and therefore these orders will be shipped by air flight.