materials inventory as needed. Rail tanker cars from Louisiana and Pennsylvania carrying paraffin wax are delivered twice a week for crayon production. Since the rail cars feed directly into production, any disruption in delivery has the poten- tial for shutting down production. Bad weather is a particular risk in this part of the company's supply chain since it can prevent the transport of goods during hurricanes or snowstorms. Crayola attempts to source as many raw materials from domestic sources as possible. Cartons, clay, ink, labels and corrugated boxes come from the mid-Atlantic region of the United States, while those plastic compo- nents Crayola does not manufacture on site, such as nibs for markers, are sourced from Asia and can take up to 120 days to ship through the Panama Canal to the Port of Newark. Materials used in kits and bundles come from Korea, China, Vietnam and Brazil, and face similar shipping logistics. When considering work-in-process inventories at Crayola, paints, mark- ers, modeling clays, and many of the crayons coming off the production line are boxed into trays for use downstream in creating kits and bundles. These items are considered work-in-process items, even though the individual units are finished goods (i.e., a crayon or marker is completely manufactured once it comes off the line). The same is true for marker barrels, paint pots and other plastics. Specialized equipment is used to make these items which feed downstream production. Recently, Crayola's leadership expected that actual demand for its popu- lar Marker Maker toy product might come in higher than the original forecast. As a countermeasure, Crayola established duplicate capacities in China and the U.S. to meet the aggregate potential demand. In China, the company pro- duced the original forecast and delivered to customers as planned. However, when the actual demand was 26% over the original forecast, Crayola could meet the surge in demand because it had positioned the long lead time ink bottles in its Pennsylvania plants and was able to mold the plastic parts using marker components from its core marker product. By utilizing existing machine capacity in its plants, reducing the lead time of ink bottles by making them in Pennsylvania, and by duplicating tooling, Crayola was able to ensure that its customers and consumers were satisfied during the holiday season. QUESTIONS 1. Consider the pressures for small vs. large inventories. Which situation does Crayola seem to fit, and why? 2. Explain how both independent and dependent demand items are pres- ent at Crayola. 3. The Marker Maker product recently experienced an unexpected surge in demand and the supply chain's agility was credited with helping to meet the crisis. We have discussed four ways to classify operational inventories by how they are created. Regarding the ways managers can use these inventories to satisfy demand, explain how Crayola can achieve the flexibility to adjust to unexpected demand surges.