TIMBUK2 EXECUTIVE SUMMARY

QUESTION 1
Table 1 shows that Timbuk2 sells through five different channels: Domestic, International, eCommerce,
Corporate and Other. Domestic and international channel customers received their bags between 2 to 3
weeks. On eCommerce channel units are sold directly to customers at retail prices rather than at
wholesale prices to retail stores which then added their own markup and customers received their bags
within 2 to 3 days. On corporate channel units are sold with specialized logos to corporations,
contributing only marginally to profitability and customers have to wait 4 to 6 weeks for their orders.
The "other" channel is reserved for some special deals that were relatively low priority and low margin.
By 2002 the relatively new eCommerce channel by far the most profitable channel for Timbuk2 with
US$1.599.618 in sales.
QUESTION 2
Timbuk2 should consider next factors to decide options to offer customers through mass customization:
- Customized Products: Customers are allowed to configure and order individual bags to their own
specification. But for example incorporate a pallet of colors involves additional stock inventory. If it is
offered a bag with or without a handle will require re-configure machines and processes. Give an option
on different panel sizes would be even more complex due to the need of new equipment able to cut
pieces at different sizes with little setup time.
- Workers Training: Workers from San Francisco produce customized bags in the assembly line, so they
have high technical skills and training. Although, the skill required to make a messenger bag is not at all
that intensive, the process of putting together a different bag each time to a different set of
specifications means that the workers go through a certain variety in their work. Additionally, their work
would very likely incorporate more than one specific task, as the group is not at all that large in the US.
On the other hand, the Chinese assembly line, might be most likely involve more division of labor. We
can expect workers to be grouped together and assigned specific tasks for each group. The nature of the
work may be very mechanical and repetitive, thus technical skill is hardly necessary for the workers. It
could take time that each of these workers performs specific tasks affecting customization.
QUESTION 3
The costs of moving production to China are:
- The supplier relationship would have to be managed closely, it means that Timbuk2 would probably to
make near monthly (and costly) visits to China to maintain the relationship and to ensure high quality.
- The cost of a shipping container from China to San Francisco yielded an estimate of $1 per bag via an
ocean carrier, which requires at least 4 to 6 weeks lead time. On the other hand, if bags are shipped by
plane, they would arrive within 2 or 3 days, but then the cost would rise to around $15 per bag.
Obviously does not exist these costs and lead time associated to transport producing in San Francisco.
- The long lead time from China (assuming ocean shipment) would also involve more inventory.
- Table 4 shows that more direct labour content is needed in China (45 minutes) vs. the US (35 minutes).
The benefits of moving production to China are:
- Low cost of Chinese labor, particularly in textiles, plastic products and travel goods industries. On
average, workers in textiles earn around $0,60-$1.30 per hour in China versus $11-$20 per hour in the
US. Moreover, an employee in China have fewer benefits and holiday and work an average of 2,930
hours per year. In fact, Table 4 shows that items such as hourly wage ($1.25 vs. $ 12.5) and other
manufacturing expenses ($0.75 vs. $ 1.5) are cheaper in China than the US.
- Further expansion of the non-customized sales channel would make manufacturing in Asia more
attractive in the future because it is considered a significant expansion of sales through the wholesale
channel. Therefore, Timbuk2 could increase easier its capacity of production if source from China.
The challenges of outsourcing are: Relationship with Chinese supplier (quality, monthly orders, and 2 to
3 month lead time), warehousing in China, lead time from China (4 to 6 weeks by ship), transport costs
from China ($1 to $15 per bag) and holding finished goods inventory San Francisco in anticipation of
demand. It will require warehousing and good forecasting skills because demand fluctuated throughout
the year and will require taking gambles with finished goods inventory if customer preferences changes.

Customized products and workers training will also be issues if source from China as explained above.
The changes needed to make are: The suppliers from the Far East will provide directly raw materials to
the factory in China. Assuming that the warehouse and factory are situated in one location, it may also
serve as a warehouse while waiting for the entire order to be completed. When orders for bags have
been fulfilled, the bags are shipped overseas to San Francisco to be stored in a warehouse and
distributed to customers as needed. It has to be considered that customized products will be better to
be produced in the US as explained in Question 2, as well as, products ordered with time constraints
considering lead time and cost of transport from China.
After outsourcing the San Francisco factory could be used to produce customized products orders (at
least at the beginning) and also it can be used as a warehouse. Customers may either order the bags
through the Timbuk2 website or they may just purchase them directly from the retail outlet. For
internet orders, the bags may ship directly from the warehouse in San Francisco. It could be a good
benefit to save time due to the disadvantage of shipping time. Also bags could be shipped by overseas
but feasibility and profitability need to be verified besides cost and lead time of transport.