Case Study: Just in time for the holidays

Date: January 16, 2007 By Pham Thi Thuy Ha

Problem: North Pole Workshops’ production capacity can not meet the surging demand for Timmy CDs on Christmas Eve. The management team gets stuck in mapping a solution to fulfill such demand because team members have their own solutions and they oppose the others’ solution.

Reasons:

- Weak demand forecast ability (the actual demand is 20% over the company’s assumption)

- Weak production planning ability

- No links between demand and production planning

- Do not have compelling product strategy, sales & marketing strategy, operation strategy

Suggested temporary solution:

- If the company can use current production lines of Meorwrrr or change them to produce Timmy CDs, the company should stop producing Meowrrr and produce Timmy CDs.

- If the company can not use other production lines to produce Timmy CDs, it should sell Moewrrr in the US market instead of Timmy CDs as proposed by Fiffledip.

Suggested long-term solutions:

Production strategy:

- Redesign products so that all products can share as many common components as possible. This will help the company use a production line to produce various products.

- Redesign production process to make it become flexible to produce many types of toys.

- Diversify product lines so various products can substitute each other when one product is not available on sales.

Operation strategy:

- Adopt a flexible manufacturing system such as cellular manufacturing to achieve mass customization and reduce production lead time.

- Outsource some unimportant components in the US.

- Outsource toy production with tight control over product quality to China. This will help the company fulfill surging demand in the Asian market, cut production costs and reduce pressure of over capacity.

Branding strategy:

- Create and maintain successfully a strong brand to deliver the “soul” of the company’s toys to children and make them understand the core brand values rather than a single product Timmy. A strong brand can make children feel happy with various toys from the companies and willing to buy other toys when the toy they want is not available.

Sales & marketing strategy:

- Improve demand forecast ability. The company should make demand forecast by using historical sales data and managerial judgment of the current market conditions. But the company should not make demand forecast by basing on the number of the letters received from children.

- Use letters from children as a source of information to develop new products that meet children’ preferences and predict future purchase trends

- Sell toys to the core values of the brand

- Create & develop a strong distribution channel that can sell the core brand values to children

- Use up-selling: encourage children to continuously buy upgraded toys. This strategy can motivate children to visit stores often and buy new products that bring the company greater profits.

- Use cross-selling: sell one toy to children and recommend them to buy other toys as complement toys. This strategy can encourage children to make their own collection of the company’ various toys, and create the desire to buy many types of toys.

- Urgent purchase strategy: create the feeling of urgency to buy the company’s toys when the items are available. This strategy can encourage children to buy toys around the year instead of waiting for Christmas. By doing so, the company can avoid the surge of seasonal demand and predict better future demand.