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Crayola Supply Chain Management Insights

This document discusses Crayola's supply chain operations for two products. It notes that Crayola uses accurate forecasts and quality standards to meet dynamic sales volumes and customer expectations. When new products are developed, the supply chain must be examined to ensure demand can be accommodated. The document also describes Crayola's use of make-to-stock and assemble-to-order supply chains across its three US manufacturing facilities and distribution center. Outsourcing production to Asia could reduce costs but may also introduce risks around intellectual property, coordination difficulties, and potential drops in quality.

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29 views5 pages

Crayola Supply Chain Management Insights

This document discusses Crayola's supply chain operations for two products. It notes that Crayola uses accurate forecasts and quality standards to meet dynamic sales volumes and customer expectations. When new products are developed, the supply chain must be examined to ensure demand can be accommodated. The document also describes Crayola's use of make-to-stock and assemble-to-order supply chains across its three US manufacturing facilities and distribution center. Outsourcing production to Asia could reduce costs but may also introduce risks around intellectual property, coordination difficulties, and potential drops in quality.

Uploaded by

pamela
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Running head: MODULE 6 ASSIGNMENT 1

Kabanga Kapaipi

Module 6 Assignment

Global Operations Management

[Danielle Babb]

5th November, 2017


MODULE 6 ASSIGNMENT
2

Question One

Dynamic sales volumes

Competing priorities would include delivered cost and optimal lead times as well as

quality. As such Crayola’s two products in question will require accurate forecasts so that they

order enough supplies and have adequate work-in-progress products at their distribution center to

meet customer needs.

Customer Service and quality expectations

The two products must meet the standards set by the Art and Creative Material Institute

(ACMI). All raw materials at each of the three plants are evaluated by independent board

toxologists so that Crayola can assure its customers that its products are not only of the highest

quality, but are safe.

Service/ product proliferation

When the marketing division develops a new product kit, the sourcing of raw materials

and downstream production processes must be done addressed to ensure that the forecasted

demand can be accommodated at the existing facilities. Before the introduction of Color Wonder

recently, the existing supply chain was examined on whether it could support the addition of

specialized ink markers, where to source the coated paper and how best to create kits containing

both markers and paper.

Emerging markets

The firm is looking at expanding the Washable deluxe painting kit into Asia. It is

assembled from components both from the USA and Asia (Vietnam and China). As some of the

kit’s components are transported to the USA from Asia and assembled by for relatively high
MODULE 6 ASSIGNMENT 3

labor costs, the supply chain for this product may have to be near shored to reduce both assembly

costs and cost of sales for products sold to their Asian customers.

Question Two

Crayola has both efficient and responsive supply chains. Two thirds of the products it

sales are produced in three manufacturing facilities located in Pennsylvania. Each of these

produces unique components and has its own unique supply chain because each uses different

raw materials, and as such, has different supplier requirements. These facilities produce standard

products and are located along the line of rail and uses locally sourced raw materials mostly,

which leads to a low cost of production. These components from each facility’s supply chain is a

finished product produced in a Make-to-stock supply (MTS) chain.

However, these components still have to be sent to the company’s distribution center

nearby where the components are assembled into kits, which are considered as finished products

by the customers. At this point, when customers place an order, the stock of already existing

components are assembled to order specifications in an Assemble-to-order (ATO) supply chain.

Question Three

Outsourcing decisions depend on decision some factors being: labor costs, rework and

product returns, logistics costs, tariff and taxes, market effects, labor laws and unions, internet

access, energy costs, access to low cost capital, and supply chain complexity (Kajewski, 2015).

If Crayola decided to use the near shoring option and move their production facilities to Asia, the

expected in benefits would include reduced labor costs; easier logistics getting products to the

customers; and lower tariffs, and tax costs.


MODULE 6 ASSIGNMENT 4

The potential pitfalls include that the outsourcing decision might be risky when the

previous process is not fully integrated and well defined as it was in the USA. Moving the supply

chain abroad may also result in intellectual property transfer, which if not managed properly

could lead to helping set up potential competitors. In addition, the long distance between the

headquarters and the production plant would make the coordination of material and information

flow much more difficult. This could easily compromise product quality, with the accompanying

consequences of drop in cost of quality.


MODULE 6 ASSIGNMENT 5

References

Kajewski, L., Malhotra, M., & Ritzman, L. (2015). Operations management: Processes and

supply chains (11th Ed.). Boston, MA: Pearson-Prentice Hall.

Common questions

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Accurate sales forecasting is critical for Crayola to ensure that they order adequate supply quantities to maintain efficient work-in-progress levels and meet customer demand without overproduction or stockouts . Proper forecasting supports optimal lead times and cost efficiency within the supply chain by aligning production schedules and raw material procurement with predicted market needs .

Crayola should consider factors such as labor costs, logistics costs, tariffs and taxes, market effects, and the complexity of the supply chain . Additional considerations include potential risks associated with intellectual property, the impact on product quality due to distance, and the need for a well-integrated and coordinated operation . Each of these factors could significantly affect the benefits and potential challenges of outsourcing or nearshoring production .

By locating its manufacturing facilities in Pennsylvania, Crayola benefits from reduced production costs due to locally sourced raw materials and the convenience of being along rail lines, which facilitates efficient transportation . This strategic location minimizes logistics complexities and supports the efficient Make-to-stock (MTS) supply chain, thus enhancing operational efficiency and reducing overall costs .

Emerging markets like Asia offer opportunities for Crayola's Washable deluxe painting kit through potential market growth and expanded customer bases . However, challenges include higher assembly costs in the USA, which might necessitate nearshoring to reduce costs, and dealing with varied market regulations and customer preferences in Asia, requiring strategic adaptations to supply chains and marketing efforts .

Shifting to an Assemble-to-order (ATO) supply chain model allows Crayola to offer customizable product kits, enhancing customer satisfaction and potentially increasing market share . However, risks include increased complexity in inventory management and potential delays if components are not available for immediate assembly . Balancing component stock levels becomes more challenging, necessitating precise demand forecasting to avoid bottlenecks .

Crayola's use of both efficient and responsive supply chains allows it to produce standard products at a low cost using locally sourced materials and distribute these efficiently via its Make-to-stock (MTS) supply chain, while also meeting customer-specific demands with Assemble-to-order (ATO) flexibility . This dual approach enables Crayola to keep production costs low while maintaining the ability to customize products for customer orders, ensuring both cost efficiency and customer satisfaction .

Crayola could face challenges such as intellectual property risk, increased difficulty in coordinating material and information flows, and potential quality compromises if it moves production to Asia . The long distance from headquarters could complicate oversight, leading to issues with maintaining product standards and efficient operations . This can impact the cost of quality and increase the risk of setting up competitors in these markets if not properly managed .

Crayola ensures that its products meet safety and quality standards by having all raw materials evaluated by independent board toxologists and adhering to standards set by the Art and Creative Material Institute (ACMI). This rigorous quality assurance process reassures customers about product safety and maintains high-quality standards, thereby playing a crucial role in customer satisfaction and brand reputation .

The addition of the Color Wonder product line required Crayola to examine if their existing supply chain could support additional components like specialized ink markers and coated paper . To accommodate this new product, Crayola had to assess whether their facilities could manage the increased demand and integrate new materials sourcing into their operations without disrupting current processes, indicating a need for strategic supply chain adjustments .

Crayola can balance competing priorities by ensuring that accurate forecasts are made for their product sales, allowing them to order sufficient supplies and maintain adequate work-in-progress inventory at their distribution centers . By complying with standards set by the Art and Creative Material Institute for customer service and quality expectations, Crayola can ensure product safety and meet customer quality demands . Additionally, strategic sourcing of raw materials and a well-planned supply chain can facilitate timely deliveries while managing costs effectively .

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