Where in the World Is Timbuk2?

Outsourcing, Offshoring, and Mass Customization1Brennan Mulliganpaused to admire the San Francisco skyline before entering theleased building that housed all of Timbuk2’s activities, frommanagement to manufacturing (Figure 1). Who would imagine thatanyone could profitably manufacture a textile product in SanFrancisco in 2002? With competition not only from lower-costcenters in the United States but also from China and other placesin the Far East, a converted warehouse building in San Franciscowas an unlikely location for this manufacturing business. YetBrenna n was not sure Timbuk2 could continue indefinitely toproduce everything in San Francisco. While the pride andsatisfaction of producing in San Francisco were ingrained inTimbuk2’s culture, and moving production elsewhere would be a hugechange for a small company with local roots, Timbuk2 needed toremain profitable. Hence, Brennan knew there was no easy answer tothe question on the table: Should Timbuk2 outsource some (or all)of its production to a Chinese firm?

History and processesTimbuk2 were founded in 1989 by RobHoneycutt, aSan Francisco bicycle messenger with an old sewingmachine. The Timbuk2 Web site (www.timbuk2.com) describes Rob’sgoal, “to make a messenger bag rugged enough for real bicyclemessengers, yet stylish enough to appeal to a broader market ofyoung, hip urbanites as an alternative to the traditional two-strapdaypack. Our catchy name, three-panel design, distinctive ‘swirl’logo, and the fact that we’re ‘Madein San Francisco’ added to ourcachet.”

2At one time Timbuk2’s Web site claimed that its bags were“messenger-designed, civilian-approved, and guaranteed to wear likehell.”Early on, Rob became interested in lean manufacturing andmass customization and hired Brennan Mulligan, then a younggraduate from the University of California at Berkeley, to take upthe cause. Brennan joined the firm in 1993to help Rob implement hisvision. Rob and Brennan managed the company for its first sevenyears. By 2002 the management team included four other guys, who,together with Rob and Brennan, ran the show at Timbuk2.Collegiality and informality characterized the work environment,where shaving and closed-toe shoes were generally optional for themanagement team. The name of one of their early successfulproducts, “El Ocho,” was born one-night in Mexico when the VP ofmarketing woke up to find himself in jail “Number Eight.” (Thecircumstances shall remain undisclosed.)By 1996, Timbuk2 was asmooth-running operation selling a variety of bicycle messengerbags and similar products whose manufacturing process was firstcharacterized by lean manufacturing and then, once leanness wasachieved, by mass customization. Brennan reflected on the manychanges they had implemented on their path through leanmanufacturing and on to mass customization, and the many decisionsthe team members had to consider. If the company had not pursuedlean manufacturing, Brennan believed that it would not have beenable to deliver a product customized to a mass market. Leanmanufacturing’s emphasis on eliminating waste and improving qualitythrough smaller batch sizes and streamlined product and informationflows had been particularly critical. Brennan recalled that theefforts to reduce batch sizes were much more difficult than theyhad made it sound in business school. After much analysis andexperimentation, the team purchased many additional sewingmachines, greatly reduced setups at nearly every step of themanufacturing process, and altered the layout and organization ofthe factory floor in order to handle batch sizes as small as oneitem. In addition, they altered the process so that the informationassociated with a specific order, such as colors and add-onoptions, was available to workers as they worked on individualbags. A customer order was printed for each bag to accompany itthrough the manufacturing process. Through experimentation, Timbuk2found that it was most effective to have work cells of fiveemployees manufacture bags from start to finish as they filledindividual customer orders. As each cell operated, there would befive bags in the process, one for each worker. Each employee wastrained to perform all of the tasks to produce a bag, and a“bump-back” process was used to balance the workload. When theworker assigned to the last position finished her bag (sending itoff to the shipping area), she would “bump back” to thenext-to-last position and take over production of that bag,wherever it was in the process. The person in that position wouldthen “bump back” to the previous person, and so on until the personat the beginning of the process would go to the order backlog andbegin producing the bag associated with the next order in thequeue. Brennan was amazed at the dexterity, speed, and accuracy ofthe cutters and sewers, all of whom were women, mostly of Asiandescent. Figures 3-6 in the Appendix show some of the processes andinventory locations at Timbuk2.After Timbuk2 had successfullyimplemented a relatively lean manufacturing process with batchsizes as small as one, it was in a position to mass-customize bags.Many new issues had to be worked through to implement masscustomization, however, including decisions about productofferings, pricing, delivery, and order processing.The decisionsabout product offering were especially critical. How many choicesshould the company provide customers? While every bag had threepanels that could be customized according to the customer’s choiceof colors, how many colors should be allowed? Each additional colormeant more fabric to stock. What other options should the companyoffer? For example,if Timbuk2 offered a bag with a handle, themanagement team would need to configure the machines and processesand then train the sewers how to make a bag with this option. Ifthey allowed customers the choice of panel size (in addition tocolor) the issues would be even more complex, in that equipmentable to customized pieces of fabric with little setup time was veryexpensive, among other issues.Timbuk2’s process for determiningwhich choices to offer customers was based on management intuition.Options were added if they seemed relatively straightforward tooffer (in the sense that they would be easy to manufacture withprocesses currently in place and perceived to be attractive to thecustomer. For example, they would typically offer between 12 and 16color choices for the material—enough to cover most of the colorpalette, but still manageable for stocking and managing inventory.Anice feature of mass customization was that the company couldtemporarily delete a color from the product offering if it was outof stock.By 1997, Timbuk2 was able to produce bags in batches ofone with its signature three-panel, tri-color messenger bag design.Bags could be made in multiple sizes, fabrics, and colors,andTimbuk2 was also capable of adding other options to individualbags such as center dividers, reflector tabs, and tails, grabstraps (handles), and even a variety of logo colors.In 2000,Timbuk2 launched it's “Build Your Own Bag” page on its Web site(Figure 2), allowing customers to configure and order individualbags to their own specifications. Customers could see the bag theywere configuring on the computer screen and experiment withdifferent colors and options. The customer was offered differentcolors for the three panels at no extra cost, but most otheroptions, such as the alternate logo color, came at a price. Spoolsof different colored thread were mounted on the machine thatembroidered the logo on the bag. The worker would specify whichcolor should go on the bag and the machine would use the threadfrom the appropriate spool. While producing a bag with thecustomer’s chosen logo colors cost no more than producing one withthe standard logo color, Timbuk2 charged an additional $5 for anon-standard color. “Pure profit,” Brennan remarks, as he notedthat many customers chose an

alternate color.By March 2002, Timbuk2 was shipping more than200 bags per day through multiple channels.

Question

What criteria Timbuk2 should use for selecting which optionsto

offer in the e-commerce channel? Please discuss the impacts ofeach of the following options (i.e. a-c) on 1) the order

placement (i.e. the web design that enables consumers’ orderingof the option), 2)manufacturing processes, 3) facility layout, and4) added value to customers:

a)an added handle;

b)different color logos; and

c)different size panels—means customers can specify panel sizes,which may be non-standard. You need to discuss how each of a), b)and c) affects items 1)—4).