Case: The Tao of Timbuk2* Timbuk2 is more than a bag. Its more than a brand. Timbuk2 is a bond. To its owner, a Timbuk2 bag is a dependable, everyday companion. We see fierce, emotional attachments form between Timbuk2 customers and their bags all the time. A well-worn Timbuk2 bag has a certain patinathe stains and scars of everyday urban adventures. Many Timbuk2 bags are worn daily for a decade or more, accompanying the owner through all sorts of defining life events. True to our legend of indestructibility, its not uncommon for a Timbuk2 bag to outlive jobs, personal relationships, even pets. This is the Tao of Timbuk2. What makes Timbuk2 so unique? Visit its website at www.timbuk2.com and see for yourself. Bags can be custom designed by the customer on its website. After the customer selects the basic bag configuration and size, colors for each of the various panels are presented; various lines, logos, pockets, and straps can be selected so that the bag is tailored to the exact specifications of the customer. A click of the mouse and the bag is delivered directly to the customer in less than three weeks. How does it do this? This San Franciscobased company is known for producing high-quality custom and classic messenger bags according to the customers personally customized order, using a team of approximately 25 hardworking cutters and sewers. Over the years, it has fine-tuned its plants production line to make it as efficient as possible, while producing the highest-quality messenger bags available. Early on, the focus was on making the bags fast and delivering within two days, but over time they found that speed of delivery was not important to customers wanting custom bags. The local manufacturing is focused on the custom messenger bag. For these bags, orders are taken over the Internet. The customers are given many configuration, size, color, pocket, and strap options. The bag is tailored to the exact specifications of the customer on the Timbuk2 assembly line in San Francisco and sent via overnight delivery directly to the customer. Timbuk2 makes some of its new products in China, which is a concern to some of its long-standing customers.

The company argues that it has designed its new products to provide the best possible features, quality, and value at reasonable prices and stresses that these new products are still designed in San Francisco. Timbuk2 argues that the new bags are much more complex to build and require substantially more labor and a variety of very expensive machines to produce. It argues that the San Francisco factory labor cost alone would make the retail price absurdly high. After researching a dozen factories in China, Timbuk2 found one that is up to the task of producing these bags. Much as in San Francisco, the China factory employs a team of hardworking craftspeople who earn good wages. Timbuk2 visits the China factory every four to eight weeks to ensure superior quality standards and working conditions are met. On the Timbuk2 website, the company argues it has the same hardworking group of bag fanatics designing and making great bags, and supporting the local community and the increasingly competitive global market. The additional business is allowing it to hire more people in all departments at the San Francisco headquarters, creating even more jobs locally. The company has grown significantly over the years, and it now runs stores in a few major cities including Los Angeles, Chicago, New York, Toronto, Melbourne, Tokyo, and Singapore. Questions

1) Consider the two categories of products that Timbuk2 makes and sells. For the custom messenger bag, what are the key competitive dimensions that are driving sales? Are its competitive dimensions different for the new laptop bags sourced in China? 2) Compare the assembly line in China to that in San Francisco along the following dimensions: (1) volume or rate of production, (2) required skill of the workers, (3) level of automation, and (4) amount of raw materials and finished goods inventory. 3) Draw two diagrams, one depicting the supply chain for those products sourced in China and the other depicting the bags produced in San Francisco. Show all the major steps, including raw material, manufacturing, finished goods, distribution inventory, and transportation. Other than manufacturing cost, what other costs should Timbuk2 consider when making the sourcing decision?