Sher-Wood Hockey Sticks: Global Sourcing In early 2011, the senior executives of Sher-Wood Hockey (Sher-Wood), the venerable Cana- dian hockey stick manufacturer, were pondering whether to move the remaining high-end composite hockey and goalie stick production to iis suppliers in China. Sher-Wood had been losing market share for its high-priced, high-end, one-piece composite sticks as retail prices continued to fall. Would outsourcing the production of the iconic Canadian-made hockey sticks to China help Sher-Wood to boost demand significantly? Was there any other choice? THE HISTORY OF ICE HOCKEY' From the time of early civilization in places as diverse as Rome, Scotland, Egypt and South America, the "ball and stick" game has been played. The game has had different names, but its basic idea has been the same; the Irish, for instance, used the word "hockie" to refer to the sport. Some reports trace the origins of the game to 4,000 years ago, but it has survived to the present. The modern version of ice hockey emerged from the rules laid down by two Canadians, James Creighton and Henry Joseph, when they studied at McGill University in the late nineteenth century. Their rules were used in the first modem game, which was played in Megan (Min) Zhang wrote this case under the supervision of Professor Paul W. Beamish solely to provide material for class discussion. The authors do not intend to thusnate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or uansmission without in written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce matenals, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7: phone (5 19) 661 3208; fax (5 19) 661 3882: e-mall cases(jivey.uwo.ca. Copyright 'cc 2012, Richard Ivey School of Business Foundation Version: 2013-03-25 One time permission to reproduce granted b9 Richard luey School of Business Foundmion on April z2, 2014.Case Q SHER-WOOD HOCKEY STICKS: GLOBAL SOURCING Montreal, Quebec in 1875. In 1892, Canada's governor general, Lord Stanley, introduced the game's first national title, the "Lord Stanley's Dominion Challenge Trophy," later simply referred to as the Stanley Cup. In 1917, the National Hockey League (NHL) was founded in Montreal. Ice hockey found in way to the United States in 1893. By the early 19005, it had also become prevalent in Europe. Ice hockey was played as a part of the Olympic Summer Games for the rst time in April 1920 in Antwerp, Belgium. By the late twentieth century, ice hockey represented an important source of national pride to Canadians, and it had become popular in other countries in the northern hemi- sphere, especially the United States, Czech Republic, Finland, Russia and Sweden. In ice hockey, players use specialized equipment both to facilitate their participation in the game and for protection from injuries. The equipment can be classified into five categories: goalie, Mljhelmet, neck guard), protective [shoulder pads, shin pads, elbow pads, hockey pants and gloves], sticks and skates. rHead-to-toe equipment suppliers" typically offered all equipment except for goalie equipment. Among the five categories of equip- ment, sticks and skates drove the industry, accounting for almost two-thirds of global equipment sales." A hockey stick is a piece of equipment used in ice hockey to shoot, pass and carry the puck. It is composed of a long, slender shaft with a at extension at one end called the blade. The goaltender [goalie] has a slightly modified shaft with a wider paddle. Hockey stick dimensions can vary to suit a player's comfort, size, usage and stickhandling skills. Hockey sticks are manufactured either as one-piece sticks with the blade permanently fused to the shaft or as two-piece sticks, where the blade and shaft are made as separate pieces that are joined later in the manufacturing process. One-piece hockey sticks emerged more recently with the advent of new component materials. The three qualities that players seek in a hockey stick are lightness, responsiveness and the feel.'I There were three characteristics which professional players looked for: lie, ex and blade pattern. The lie of a stick refers to the angle between the shaft and the blade. Players usually seek a lie that will put the blade at on the ice when they are in their skat- ingstance. Hockey stick shafts are highly exible, and this exibility is a key component in their performance. Flex, bend, stiffness and whip are all terms used to describe the amount of force required to bend a given length of stick shaft. Until the late 1950s, hockey stick blades were rarely curved. However, in the 196 Os, players began asking their stick manufacturers to create sticks with pre-curved blades for better performance. Soon after, many NHL players became proponents of the "banana blade." In 2011, the legal limit for hockey blade curves in the NHL was 19 mm, or 3/4- of an inch. In addition, players generally expected a hockey stick to be light enough to use easily and exibly. To satisfy these qualities, the greatest change came in the materials used to make a hockey stick. One consequence of employing more advanced (composite) materials was that the manufacturing process became more complicated and required more innovations. Custom designs were prevalent among professional players who wanted their sticks to fit their own physical features [i.e., height and strength) and skills. 87 ||~ 88 PART Q Assessing the Internal Environment ofthe Firm The three primary materials for manufacturing hockey sticks were wood, aluminum and composite. The earliest hockey sticks were made with solid wood. These sticks were not very durable and were inconsistent in length and shape. In the 1940s, laminated sticks were created with layers of wood glued together to create a more exible and durable design. In the 1960s, manufacturers began adding additional W lamination or other synthetic coatings, which further enhanced the durability of the sticks. In the early 19805, Easton Hockey introduced single piece, all-aluminum sticks that were much lighter than wooden sticks. Because the stiff aluminum did not have the proper 'Teel\" to players, manufacturers then developed a light aluminum shaft with a replaceable wooden blade. The design became popular in the late 19805 and early 1990s. In the mid-1990s, advanced composite sticks were developed. Composites were com- mof reinforcing Wes, such as graphite [carbon] and Kevlar, and binders such as palms; tar, epoxy or other polymeric resins that held the Mtogether. In the following decade, graphite had become by far the most popular material for sticks used in the NHL, and it was growing rapidly in popularity for amateur and recreational players. Although graphite sticks were originally sold as shafts alone while a separate blade was purchased by the hockey player, one-piece sticks that included both the shaft and the blade eventually pre- dominated. Some manufacturers also used titanium to produce composite sticks. Moreover, Sher-Wood used foam materials, such as polyurethane, to fill blades and paddles of goalie sticks for shock absorption and stiffness. New, lighter and more durable composites were always being developed. Ice hockey sticks, roller hockey sticks, lacrosse sticks, baseball bats, softball bats and hockey skates required similar technologies to manufacture because almost all of these athletic prod- mincorporated composite materials. 3,011, manufacturing and quality control processes continued to advance in the industry. Increasingly, precise technologies were employed throughout the production process. For most composite and aluminum sticks, the sticks ex characteristic was expressed numerically. This number, which ranged from SO through 120, was printed on the stick and corresponded to the amount of force [in pounds-force) that it took to deect or bend the shaft one inch. By contrast, the ex characteristic of their wooden counterpart could not be derived precisely, because the sticks were produced using a high-volume production process that yielded sticks with variable ex properties. BASICS 0F HOCKEY EOUIPMENT INDUSTRY4 According to most industry analysts, the global hockey equipment market was showing signs of maturity, growing at just 1 to 2 per cent per annum.' The global hockey equipment market in 2010 was $555 million, with skates and sticks accounting for an estimated 62 per cent of industry sales. Ice hockey equipment sales were driven primarily by global ice hockey participation rates [registered and unregistered]. There were about 600,000 hockey players in Canada in 2010. The number of registered hockey players in Canada between the ages of5 and 25 was *Wrom Preliminary Prospectus of Bauer Performance Sports Ltd. [January 27 2011), http: waww. - storngarrtZZOllD 1"me accessed on July 10, 2011; http: zzwww. sgma. comZpressf93 sanctioned- team- -sporis- play- in- -t-he -us- remains- strong; -but, accessed on My 18. T011. arid http: ffwww. ehow. coinZway 5191903 ice- hockey- equipment- guide. html. accessed on ]u]y 18, 2011. 'Source: htips]fsecureglobeadvisor.cornZservlety'ArticleNewsfstoryfgairJZO1[0614701VOXBAUERMILSTEADATL, accessed on July 18, 2011. Case 7 | SHER-WOOD HOCKEY STICKS: GLOBAL SOURCING 89 expected to shrink by 30,000 players, or 5 per cent, over the next five years. Nevertheless, some industry analysts believed that growth rates of casual and unregistered hockey partici pation, especially in the United States, as well as growth rates in Eastern Europe (particularly Russia) and women's hockey had exceeded that of the registered segment as a whole. Other drivers of equipment sales included demand creation efforts, the introduction of innovative products, a shorter product replacement cycle, general macroeconomic conditions and the level of consumer discretionary spending. Relative to European football (soccer) or American baseball, all of the equipment required to participate in organized hockey was more expensive to purchase. Outfitting a teenager or an adult to play recreational hockey cost approximately $600. The equipment for younger players was less expensive. However, nearly 40 per cent of all ice hockey players lived in homes where the annual household income was more than $100,000 per year. The hockey sticks endorsed by professional hockey players enjoyed a strong position in the hockey stick market. Children and amateur players liked to have sticks embossed with specific players' names. Hockey stick manufacturers typically paid NHL players to use their sticks and provided the players with custom designed sticks. Competitor Brands and Strategies^ Before a Montreal company began manufacturing ice hockey sticks in the late 1880s, most players made their own. By the early twenty-first century, more than 20 brands of ice hockey sticks existed in North America and Europe, and many of the smaller equipment manufacturers had failed or been purchased by larger competitors. The main brands were Easton (Easton-Bell Sports), Bauer (Bauer Performance Sports), CCM (Reebok-CCM Hockey), Warrior (Warrior Sports), Sher-Wood (Sher-Wood Hockey), Mission ITECH (acquired by Bauer) and LouisvilleZIPS (acquired by Sher-Wood). Bauer, CCM and Sher-Wood originated in Canada, and Easton and Warrior originated in the United States. Over 80 per cent of the ice hockey equipment market was shared by three major com- petiters: Bauer, Reebok (which owned both the Reebok and CCM brands) and Easton, each of which was a head-to-toe supplier offering players a full range of products (skates, sticks and full protective equipment). Moreover, Bauer and Reebok also provided goalie equip- ment. The balance of the equipment market was highly fragmented with many smaller equipment manufacturers, such as Warrior and Sher-Wood, offering specific products and catering to niche segments within the broader market. Exhibit 1 lists the proportion of NHL players using sticks made by the five major suppliers. Each of the five major companies sought new growth in diverse categories. Easton-Bell Sports operated divisions dedicated to hockey, baseball, lacrosse and soft- ball. Easton established itself as a worldwide leader in designing, developing and marketing performance sports equipment, as well as a broad spectrum of accessories for athletic and recreational activities. Easton Hockey's technical prowess made its stick the number one choice among NHL players and amateurs alike and kept its gloves, skates and helmets at the forefront of technological advance. For years, Easton Hockey had signed head-to-toe contract extensions with NHL players. Easton's innovation processes followed a unique Summarized from Preliminary Prospectis of Bauer Performance Sports Ltd., http://www.fundinguniverse. com, accessed on July 18, 2011: http:27www.eastonbellspons.com, accessed on July 18, 2011, http:7/www. bauer.com, accessed on July 18, 201 1; http://www.sher-wood.com, accessed on July 18, 2011 ; http:/Zwww. adidas- group.corporate-publication.com, accessed on July 18, 2011; http://www.wamor.com, accessed on July 18, 2011; http://www.snckslack.com. accessed on July 18, 2011; and http:/7www.hockeystickexpert.com, accessed on July 18 201190 PART3 | Assessing the Internal EnvironmentoftheEJm, routinedeveloping new technologies for composite ice hockey sticks rst and then apply- ingthe advances in materials to skates, baseball bats and softball bats. In 2011, Easton-Bell offered 48 types of player and goalie sticks in its Synergy and Stealth lines. Easton-Bell's net sales for 2006 were $639 million compared to $379.9 million in 2005, an increase of 68 per cent. Gross prot for 2006 was $212.9 million or 33.3 per cent of net sales, as compared to $134.9 million or 35.5 per cent of net sales for 2005. Bauer Performance Sports manufactured ice hockey, roller hockey and lacrosse equipment as well as related apparel. Bauer was focused on building a leadership posi- Wand growing its market share in all ice hockey and roller hockey equipment products through continued innovation at all performance levels. I]; produced products at competi- tjyg prices using alternative materials, sourcing arrangements and supply-chain efciencies. 5' also targeted emerging and underdeveloped consumer segments, including Russian play- ers and female players. In 2008, Bauer Performance implemented several strategic my mto enter new industries and to enhance its market leadership in its chosen categories. In 2011, Bauer offered 20 types of player and goalie sticks in its Supreme and Vapor lines. Bauer was the number one manufacturer of skates, helmets, protective gear and goalie equipment, and a close number two to Easton of sticks in 2010. It enjoyed a 45 per cent share of the global hockey equipment market. m prot margin as a percentage of net revenues was 37 per cent. Reebok-CCM Hockey concentrated on providing hockey equipment and apparel. The company leveraged its multi-brand approach to target different consumer gem In particular, it developed innovative technologies that appealed to image-conscious con- sumers, Its products were best suited to the physical side of the game and were frequently purchased by consumers seeking performance and quality. In 2011, they offered 32 types of player and goalie sticks. Reebok-CCM's net sales in 2010 were $280 million, and its key markets were Canada, the United States, Scandinavia and Russia. Warrior Sports concentrated on providing lacrosse and ice hockey equipment, apparel and footwear. The company was dedicated to a core set of philosophies and strengths: tech- nical superiority, grassroots marketing, original and creative youthJl expression, and strong partnerships with retailers and suppliers. In 2011, Warrior offered 15 types of player and goalie sticks. Generally, hockey companies provided one type of hockey stick at three different price pointsjunior, intermediate and senior. The reference retail prices of the ve comet-i,- tors' best senior composite sticks varied. The Bauer Supreme W Composite, Easton Stealth 519 Composite and Warrior Widow Composite Senior were all priced at $229.99. The CCM U+ Crazy Light Composite and Reebok 11K m 1]] Composite came in at $209.99, while the Sher-Wood T90 Pro Composite was priced at $139.99."r Global Sourcing in the Hockey Equipment Industry Similar to other industries, the hockey industry eventually entered the global sourcing era. Global sourcing is the process by which the work is contracted or delegated to a company that may be situated anywhere in the world Sourcing activities can be categorized along both organizational and locational dimensions (Exhibit 2 lists several types of global 'Source for all, httpwwwamazoncom, accessed on May 29, 201 1. "This paragraph 15 Whom Hari mmlia m and Leslie P. Willcocks The Handbook W Outsourcing rind Offshoring (Hampshire: Macmillan, 2009]: and Marc]. W Ashlyn M. Wang, and Dara G. Case 7 | SHER-WOOD HOCKEY STICKS: GLOBAL SOURCING 91 sourcing). From an organizational perspective, the choice between insourcing and outsourc ing involves deciding whether to keep the work within the firm or contract it out to an independent service provider. From a locational perspective, three choices are available- onshoring (within the nation), nearshoring (to a neighbouring country) and offshoring (to a geographically distant country). To optimize the overall benefits and hedge risks, companies often seek to balance their global outsourcing and insourcing activities. Exhibit 3 lists sex- eral of the factors typically considered by manufacturers faced with the decision of whether to onshore insource or offshore outsource. As early as the 1980s, western sports equipment manufacturers, such as Nike and Reebok, started to outsource the manufacture of sporting goods, such as running shoes, to Asia. Nevertheless, before the year 2000, hockey companies preferred insourcing over out- sourcing and executed this strategic focus through organic growth, suategic acquisitions and establishing company-owned factories in other countries; for example, Easton and War- tior had factories in Tijuana, Mexico. During the past decade, the hockey industry began to outsource. In 2004, Bauer Nike Hockey shut down or downsized three plants in Ontario and Quebec, eliminating 321 manufacturing jobs. The company outsourced about 90 per cent of its production to other makers in Canada and the rest to international suppliers. From 2002 to 2008, Reebok-CCM closed five plants in Ontario and Quebec and outsourced manufacturing to other countries, eliminating about 600 manufacturing jobs. Easton and Warrior also outsourced part of their manufacturing to Asia but still kept their factories in Mexico. The capacity of Warrior's Mexican factory was estimated to be 4,000 composite sticks per week produced by 250 employees in 2008. (Exhibit 1 lists the manufacturing sites associated with several of the leading hockey stick brands.) Global manufacturing outsourcing was characterized by some drawbacks. It separated manufacturing activities from R&D and marketing activities and challenged a company's ability to coordinate initiatives between these functions, such as product innovation, designing for manufacturability, supply chain efficiency and quality control. Especially in offshore outsourcing, cultural differences caused miscommunication, technology distance necessitated extra training, and geographic distance resulted in extra lead time or cycle time. In March 2010, Bauer Hockey recalled 13 models of junior hockey sticks, manufac tured outside of Canada, due to excessive lead levels in the sticks' palnt that was detected by public health officials in random testing Offshore outsourcing also threatened to negatively impact a company's public image if it reduced domestic employment. In November 2008, UNITE HERE" launched a national campaign to persuade Reebok to repatriate the production of its hockey equipment and jerseys." Additionally, global economic dynamics, such as changing labour costs, raw material costs and exchange rates, introduced new uncertainties into global sourcing. Exhibit 4 lists a sample of comparative labour rates prevailing in Canada, the United States, Mexico and China. In 201 I, the Boston Consulting Group (BCG) concluded that with Chinese wages rising and the value of the Yuan continuing to increase, the gap between U.S. and Chinese wages was narrowing rapidly. Industries other than sporting goods had already begun to practice repatriationany- facturing, also known as reshoring or backshoring, In fact, reshoring had been an alternative this paragraph is summarized from Masaaki Kotabe, Global Sourcing Strategy. ' RED, Manufacturing, and Market- ing interwar.es (New York: Quorum Books, 1992.) UNITE HERE: a union representing $0,000 food service, apparel, textile, hotel and distribution workers across Canada. "http://www.cbc.caZnewsZstory/2010/03/18Znike-liockeystick-recall.hunt, accessed on July 18, 2011.sa PART 3_ Assessing the Internal Environment of the Elim in global sourcing planning from the beginning. For German manufacturing companies In the period 1999 to 2006, every fourth to sixth offshoring activity was followed by a reshoring activity within the following four years, mainly due to lack of flexibility and quality problems at the foreign location. This served as a short-term correction of the prior location misjudgement rather than a long-term reaction to slowly emerging economic trends.'2 SHER-WOOD HOCKEY INC.: COMPANY TIMELINE13 Heading 3 Sher-Wood Hockey los. manufactured and distributed hockey sticks and equipman in Canada. Based in Sherbrooke, Quebec, it was founded in 1949 and was formerly known as Sherwood-Drolet, Ltd. For more than 60 years, it had been one of Canada's best-known hockey equipment manufacturers. In 1976, Sherwood-Drolet introduced its flagship wooden stick, the PMP 5030, which was described as "the best stick in the world" by NHL legend Guy Lafleur. By 2007, the company had made more than 6 million PMP 5030s. In 2006, Sherwood-Drolet sold about one million wooden and 350,000 composite sticks. The company anticipated that the composite stick business would continue to grow in terms of volume and profitability. Earlier, Sherwood-Drolet had started contracting out the production of its lower end wooden models to producers in the Ukraine. In 2007, it outsourced the production of PMP 5030 (mid to high end wooden) sticks to a local provider in Victoriaville, Quebec. Meanwhile, the company concentrated on making com- posite sticks fashioned from graphite, Kevlar and other synthetics. Notwithstanding the company's efforts to move its wooden stick production offshore, it claimed that it would continue to make custom wooden models for professional hockey players, such as Jason Spezza of the Ottawa Senaders However, when Spezza learned that Sherwood-Drolet would no longer be manufactur ing his favourite wooden sticks in Canada, he decided to move to another company. "They local manufacturers} can get sticks to me in a week now. If it's over there [China], the pro- cess will probably be just too much,' said Spezza.'4 Ultimately, Montreal-based Reebok designed and produced a stick for him that had a graphite shaft and wooden blade, but the look of a one-piece. In November 2008, Reebok issued a press release announcing that She- zza would start using their sticks_ ..we are excited to work with Jason, not only on mar- keting iniciatives, but also on the research, design and development of future Reebok Hockey equipment."" By May 2008, Sherwood-Drolet had filed a proposal to its creditors under the Bankruptcy and Insolvency Act. CBC News reported, "It has been hurt in recent years by shift from 'Source: S. Kinkel and S. Maloca. 'Dfixers and Antecedents of Manufacturing Offshoring and Backshoring; A German Perspective," Journal of Purrlesina and Supply Maniigeinent 15.3 (20D9): 154fi s. summarized from http:7/www.sher-wood.com, accessed on July 18, 2011; btip:/fiockeystickexperi.com, accessed on July 18, 2011; http]/www.canada.cornZtopicsZsporis/story.htmlhd=87c5d6b3-8872-496a-8d4f- 01fSf4e36342, accessed on July 18, 2011 ; and http:/ZwwwthestarcomZnewsZcanada/articleZ273561, accessed on July 18, 2011. '.http://www.canada.comZtopicsZsportsZstory.htm 1?id=87c5d6b3-8872-496a-8d4f-0if5f4e36342, accessed on July 18, 2011 "http/www.reebokhockey.comZlabsZlabs-blog/entries/2008ZNov/25/entry/jason-spezza-reebok-hockey- family/, accessed on July 18, 2011.Case 7 | SHER-WOOD HOCKEY STICKS: GLOBAL SOURCING 93 wooden hockey sticks to composite sticks. " Richmond Hill, Ontario-based Carpe Diem Growth Capital bought the company and changed in name to Sher-Wood Hockey Inc. In September 2008, Sher-Wood purchased the hockey novelty and licensed assets of Inglasco. In December that same year, it purchased TPS Sports Group, a leading manufac trer and distributor of hockey sticks and protective equipment. Sher-Wood transported TPS's assets from Wallaceburg and Strathroy, Ontario to Quebec, consolidated three compa- pies and invested an additional $1 S million to set up the new factory. Production As of March 2011,'7 Sher-Wood produced sticks (sticks, shafts, blades), protective equip- ment (gloves, pants, shoulder pads, elbow pads, shin pads), goalie gear (goalie pads, catcher, blocker, knee protector, arm and body protector, pants) and other accessories (pucks, bags, puck holders, mini sticks, bottles, carry cases) for ice hockey. The company also sold some equipment and accessories for street hockey (goalie kit, sticks, pucks, balls), as well as sports novelties for hockey fans. The company introduced new sticks twice a year-in May5une and at the end of October. The life cycle of a product line in the market was about 18 to 24 months. By the end of 2010, Sher-Wood provided 27 types of player and goalie sticks. Thirteen of them were wooden. Although Sher-Wood had targeted various NHL players in order to support the cred- bility of the brand, the company mostly targeted junior teams, AAA teams and a couple of senior leagues. Sher-Wood only conducted a low volume of custom design for high-end players and mainly provided custom products from a cosmetic standpoint. For example, personalizing the graphic or colour of the sticks. Sher-Wood used to need two to three weeks to produce customized sticks for an NHL player. In 2010, Sher-Wood sales volume for sticks produced in Sherbrooke dropped almost 50 per cent compared to 2009. Its Chinese partners manufactured most of their composite hockey sticks. Sher-Wood's plant manufactured the remaining high-end, one- piece composite sticks and goalie foam sticks, about 100,000 units annually, with 33 workers in the factory and seven staff in the office. The return on investment of the fixed cost in Canada was low. Executives believed that they needed to provide a competitive retail price to boost the demand. To do so, they also needed to afford retailers a higher margin than their com- petitors did, so that retailers would help with product presentations in stores and market- ing efforts. These approaches called for low cost production as well as decent quality. To reduce the cost and fully utilize the facilities, they could outsource the remaining produc- tion to the partner based in Victoriaville and move facilities there. However, according to regulations in Quebec, Sher-Wood did not have enough latitude to move or sell the equip- ment to their subcontractor in Quebec. They also considered backshoring the manufactur ing out of China. They concluded that it would be more advantageous to stay in China from both cost reduction and R&D standpoints. Chinese Partners' Condition and Collaboration Sher-Wood's suppliers were located in Shanghai, Shenzhen and Zhongshan City near Hong Kong. They were producing tennis and badminton rackets, developing the expertise in com- posite technology and relevant sporting goods production. Sher-Wood began to cooperate "http:/7www.cbc.caZnewsZbusiness/story/2008/05/0SZsherwood-filing.htmliref=rss, accessed on lay 18, TO11. "Summarized from butpl/www.sher-wood.com, accessed on May 29, 2011.with them about 10 years ago when it started selling composite sticks. For years, these suppliers manufactured one-piece and two-piece composite hockey sticks for hockey com- m around the world. Gradually, they accumulated manufacturing capacity and RGD capability. Sher-Wood's main supplier in Zhongshan City operated two shifts for 10 hours a day, six days a week. Their annual capacity was more than 1 million units. Moreover, they possessed an Wteam with 10 to 15 engineers, which was able to produce a prototype within one day with full information. On the contrary, it would cost Sher-Wood four to ve months with a team of two to three engineers to produce a similar prototype. More m- my. as a consequence of their long-term cooperation, the main supplier had developed a certain feeling about hockey so that language and cultural barriers were not problems any more. M were becoming a partner rather than one section within the supply chain," said Eric Rodrigue, Sher-Wood's marketing vice president Sher-Wood and its Chinese supplier partner needed to collaborate closely. On one hand, Sher-Wood had to send their experts to China to coach the partner about how to pro- duce sticks according to their specications. 0n the other hand, although Sher-Wood and the partner had similar on-site labs to conduct product tests, Sher-Wood mainly focused on the feeling of the stick, that is, the reproduction ofhow the ses, reception, etc., would feel when a player placed his or her hands a certain -._T ..... _._:k. Sher-Wood also conducted tests on ice with professional players, something their supplier could not do. Moreover, with young, passionate and knowledgeable new managers in management and marketing, company executives thought they were ready to meet the extra cost and effort in market collaboration between Sher-Wood, the partner in China and retailers. Company executives were concerned with rising m costs, material costs and the currency exchange rate in China. Nevertheless, the overall cost of manufacturing in China was still lower than the cost in Quebec. They estimated that cost reduction was 0 to 15 per cent per unit depending on the model, with good quality and fast turnaround time. More- over, some industries such as textiles had started to relocate their manufacturing to new emerging counties, such as Vietnam and Cambodia, for low Wand equipment costs; however, there was no RAID advantage in composite materials in these alternative locales. Executives were also concerned with other issues. First, although the main supplier was able to produce customized sticks for an NHL player within 24 hours, the shipping was quite expensive from China to Quebec. Second, the main supplier used to produce huge volumes fast but without product personalization. Third, the game of hockey was perceived as a Western cultural heritage sport, so anything relevant to hockey which was made in China had the potential to negatively inuence the market perception. However, all their competitors had outsourced manufacturing to China for years. Heading 2 I THE CHALLENGE In early 2011, the question for Sher-Wood senior executives was how to boost their hockey stick sales. They believed that they should cope with this challenge by providing sticks with better quality, better retail price and better margin for retailers. They wondered whether they should move the manufacturing of the remaining high-end composite sticks to their suppliers in China or whether there was any alternative. If they decided to shift their remaining manufacturing outside of the company, they needed to deal with a variety of issues. To fully utilize the facilities in Sherbrooke, they needed to move equipment to China, which was difcult and time-9mm because of export regu; 13am. To set up the manufacturing machines and guide the WW they would need to send experts there. To complete the coming hockey season between September and