The production line in China
Case: Kathy’s Bespoke Bags
Kathy started making bags as a hobby and a creative release a few years ago. She started custom making them for her friends initially. From a few orders, the orders began building up and so did the business. Today she has facilities in the UK and in China for bag making. The bags can be customised to match with different outfits and different occasions. Each bag is custom designed by the customer on its website. The customer can select the basic bag configuration and size, the fabric, colours for each of the various panels. The designs, logos, padders, pockets, closures and straps can be selected so that the bag is customised to meet the exact requirements of the customer. Once the design is selected, the customer can confirm the order, make payment and the bag is delivered directly to the customer in only two days.
The company is UK–based. With a team of expert in-house designers with knowledge of materials for the finished product, the company has earned a name for producing high-quality custom bags according to the customer’s bespoke order, using a team of cutters and sewers with high standards of quality workmanship. Over the years, the performance of the plant’s production line has improved and is as efficient as possible, while producing the highest-quality bespoke bags available. The UK plant is focused on the custom messenger bag, for which orders are received over the internet with customers choosing their own designs from a range of options. The bag is tailored to the exact specifications of the customer on the production line and sent via overnight delivery directly to the customer.
With increasing demand and growing customer base, Kathy has started making some of the new products in China. Laptop bag is the bestseller among the new products. Besides laptop bags, the products include handbags, men’s bags, cosmetic bags, wine bags and wallets with different materials such as leather, faux leather, canvas, polyester and nylon among others. While the designing of these new products is still done in the UK, the manufacturing is done in China. The company has implemented a system that ensures all products are made with the same consistent quality over-and-over. The new range of bags are much more complex to build, is more labour intensive and requires expensive machines to produce. Making these bags in the UK plant is not a viable option. After a thorough research of bag making factories in China, Kathy and her team zeroed in on one factory capable of producing these new bags. As in the UK plant, quality workmanship being a priority, the China unit employs a team of experienced cutters and sewers.
The quality assurance team from the UK visits the China factory for a quality audit every quarter to ensure that quality standards and good working conditions are met. Over the years, the company has maintained its reputation of designing and making good quality bags, and supporting the local community and the global market. The company has established long standing relationships with leading fabric mills from Korea, Taiwan, Japan & China, and has direct access to top quality suppliers of other materials required for the design. They have also established accounts with international freight forwarders. The company reports suggest that demand is still growing for the custom messenger bags made in the UK and the laptop bags from China.
1. Consider the two major products that the company makes and sells. For the custom messenger bag made in the UK, what are the key competitive dimensions that are driving sales? Are the competitive priorities for the new laptop bags produced in China different from that of the messenger bags? If yes, how? (500 words)
2. Compare the production line in China to that in the UK along the following dimensions: (1) production rate, (2) worker skill, (3) level of automation, and (4) raw material and finished goods inventory. (500 words)
3. Compare the supply chain for those products sourced in China and the bags produced in the UK. How similar or different are they? Other than manufacturing cost, what other costs should the company consider when making the sourcing decision? (500 words)
Sample Solution
As a global leader in manufacturing, China’s economy is booming, and its goods are in abundance. The majority of tags, labels, and stickers announcing “Made in China” can be seen on a variety of products. It makes sense that Western buyers would inquire, “Why is everything created in China?” as a result. There is a lot more to Chinese products’ popularity than just the fact that there is an abundance of cheap labor available in China, which lowers production prices. China is referred to as “the world’s factory” in addition to its low labor costs due to the country’s robust business environment, lack of regulatory compliance, low taxes and customs, and competitive currency practices.
