Dynamic sales volumes – involves meeting the needs of volatile sales volumes that can stem from customer demand or internal promotions (Kajewski, et al., 2015). ColorWonder and WashableDeluxe are both highly popular global products that also contain products from diverse supply chains in the company. When designing the supply chains for the products, it is vital to optimize them to avoid unnecessary costs and ensure close collaboration between managers to predict peaks of consumer interest, either seasonal or after a promotion.
Customer service and quality expectations – there is a strict demand for product specifications and high levels of quality. Both Crayola products undergo rigorous testing during development to ensure adherence to industry standards, safety, and quality of materials (Kajewski et al., 2015).
Product proliferation – ColorWonder was developed as a unique product but was successful. However, after feedback from the market, the company started selling the paper separately, which decreased demand for the original product. Shipping the paper alone may be less expensive, but it impacted sales figures, which is an indication that another strategy may have been viable, such as adding more paper to the original kit.
Emerging markets – emerging markets such as Asia, towards which the Washable Deluxe kit is oriented, are vital to company growth. The case identifies the dilemma that supply chains must be reoriented towards this new market to save cost, thus lowering the margin of entry for the products in these countries.
It can be argued that the Crayola supply chain is efficient and partially responsive. It has a make-to-stock design where the products are built to forecast and sold from a finished stock (Kajewski et al., 2015). Consumers generally have no input into the configuration of the product, and Crayola, of course, sells through retailers, not direct-to-consumer. The product introduced is not frequent as each has to undergo design, testing, and market tests prior to the finished development. For Crayola, efficiency and lowering costs on supply chains is a primary goal, with a low-capacity cushion and inventory investment to shorten lead time.
At the same time, a responsive supply chain has the ability to respond purposefully and timely to market feedback. While Crayola does not seem to make any custom-order products, it still responds to market demands, such as with the ColorWonder product when customers indicated that the markers lasted longer than the paper. Therefore, Crayola’s supply chain is efficient as it delivers products at a low cost in a bulk capacity while also being responsive because of the multicomponent approach it uses for these popular products; it can quickly modify components as needed to respond.
Decision Factors
In terms of decision factors, moving the supply chain to Asia has more benefits. Comparative labor costs will be significantly lower in Asia, with its key mass production centers, than in the United States, even for low-cost labor. Logistics costs are decreased as well since the components for that product are made in various countries in the Asian region. Quality of production is relatively the same for this type of non-complex product. There is the consideration of market effects since Crayola is seeking to target the Asian market with this product, so producing there would be beneficial. Asian production is also less likely to experience issues with tariffs as most of the markets are part of the regional free trade organization, and labor laws and unions are much more flexible for business (Kajewski et al., 2015).
Pitfalls
In terms of pitfalls, there are no serious issues. Pulling the plug is not relevant as Crayola consistently works on improving its supply chains, and this is not an issue of ineffective supply chains but rather cost and efficiency. In terms of technology transfer, the process is low complexity of essentially packaging the components shipped from across the region rather than being shipped for the same purpose to the US. Processes may experience some difficulties, but outsourcing mass production to Asia is a well-known process in most industries, and companies quickly adapt with proper competencies.
Reference
Krajewski, L.J., Ritzman, L.P., & Malhotra, M.K. (2015). Operations management: Processes and supply chains (11th ed.). Pearson.