Case Scenario:
San Francisco's bicycle couriers.
It all started in 1989 with one product: a custom messenger bag designed for San Francisco's bicycle couriers. That unique carrier became popular with not just cyclists, but also students and professionals who loved its stylish yet durable features. Today Timbuk2 manufactures 30 products, including messenger bags, computer cases, totes, duffles, iPod sleeves, and yoga bags that generate more than $10 million in annual revenues. Loyal customers buy Timbuk2 cases at REI, EMS, Apple, and 1,200 independent specialty retail stores. The messenger bags cost from $60 to $90, depending on size; for $10 more, customers can select custom color combinations.
Although other companies have shifted production to low-cost manufacturing centers overseas, Timbuk2 still produces its messenger bags at its original San Francisco factory. To preserve its local presence and retain jobs while maintaining a financially sound company, Timbuk2 took steps to boost the plant's productivity. Originally Timbuk2 made its bags "on demand" as customer orders came in. Converting to predetermined color combinations allowed the factory to operate independent of demand and to build inventory, greatly improving productivity. "That change alone saved our San Francisco factory from going out of business," says Mark Dwight, Timbuk2's president and chief executive officer. "There is value in the made-in-USA products, and locally produced bags can be customized to customer requests on a very short lead time. That quick response is a unique advantage."
The company discovered, however, that the manufacturing of its new lines was more complex than that of the messenger bags and called for specialized machinery. These factors and the resulting high labor costs led Timbuk2 to explore offshore manufacturing options. Keeping the headquarters operation and design team in San Francisco but shifting production to a carefully selected factory in China enabled Timbuk2 to continue offering top-quality products while keeping prices affordable. Timbuk2 is proud of its commitment to ethical working conditions and fair wages at all its facilities. Executives visit the China factory every month or two to monitor the work environment and make sure that product quality remains high. The new products have been well-received, increasing Timbuk2's reputation as a lifestyle brand. As a result of its higher sales volume, the company has expanded the San Francisco factory, doubled its production staff, and added employees in all departments. It continues to roll out new products. "Our goal is to create a solid growth company, to continue delighting our customers with great products, to contribute to our local community, and to make the Timbuk2 swirl as recognizable as the Nike swoosh," says Dwight.
Critical Thinking Questions
• Mark Dwight faced considerable resistance from existing managers when he assumed control of Timbuk2 and wanted to move the production of new products overseas. He has asked for your help in preparing a presentation to win their support. Summarize the arguments in favor of offshore production.
• Now list the arguments against using foreign manufacturers and develop answers to help Dwight counter charges that it is not socially responsible to take jobs outside the United States.
• How did Dwight's decision to manufacture new products in China support the company's desire to be a good corporate citizen for San Francisco?