Case study: Crumpler

Topic 1- operations Product offered

o heavy duty bags for bike couriers

Role of operations management

Aimo to differentiate the business’s products from its competitors rather than using a cost leadership strategy.

Crumpler’s aim has been achieved through:o a better quality producto a vast variety of products in its rangeo incorporation of new technologyo Clever design

Influences on Crumpler’s operations

Globalisation Globalization has allowed crumpler to sell to more countries and markets. The expansion has allowed them to open stores in New

York, Toronto and Singapore. Crumpler bags are not available in Greece, Japan, and Hong Kong, China. Its exports are at 6 million or 50% of total sales. Recently, they negotiated with Apple, allowing them to provide their bags to more consumers. Crumpler can outsource its manufacturing and now has a global supply chain. Operations costs have reduced as the other

countries had lower costing inputs and labour.

Economic There have been many changes recently,

o the cost of oil has raised highly-due to the fact that crumpler’s bags using lots of nylon in its productions, its costs have risen highly.

o the economy of Europe and Asia have fluctuated-due to the economic slowdown and the global financial crises, sales globally have dropped immensely.

o cost of labour in Asia has risen-Asia’s labour

Technology There have been recent developments in the production of clothing and communication. Computer aided manufacturing and

designing was introduced allowing efficiency to be increased. Headquarters started using email in its communication to allow faster transmission of messages within the company. Three dimensional designing software allowed them to create new products virtually and, it could be viewed from a few

perspectives.

Design and manufacturing process All products are designed in Melbourne. Where does Crumpler purchase its materials from? Leather from Melbourne, Nylon from Taiwan and South Korea, canvas from

china, clips from Japan, webbing from China, Luggage handles from Taiwan Crumpler’s first and foremost criterion for their design team is strength and practicality. They use only the strongest materials,

e.g. the shoulder straps are made from webbings used in cranes which can lift cars. The zippers are of high quality and will not break.

Quality expectations

Crumpler knew that consumers would use the bags to hold precious technology so, the highest quality was needed. Crumpler bags are water resistant due to the nylon shell and the inner padding. Customers expect quality from such a higher price.

Competition

Many of Crumpler’s competition cannot match their quality as they are made using lower cost inputs and materials. They are made from lower quality nylon.

Their closest competition is Lowepro and North face.

Social and environmental sustainability

Crumpler’s bags are built so that they last longer and can be repaired. This means that not as much resources need to be used to make as much bags for replacement.

Crumpler does not run their factories directly, it is subcontracted when labour standards are low. In their factories, they try to improve conditions where workers work, and have an independent monitor.

Operations process

Inputs

Materials The key material inputs are heavy-duty rip stop nylon and thread to construct the bags. Crumplers’ bags have a water-

resistant 900 denier shell.

A nylon ripstop nylon, which is super strong, lightweight, durable and resistant to fraying, tearing and ripping.

Information Information from a parachute manufacturer enabled the business to start new stitching methods that added strength to

the bags. Extensive data for the design specifications for every model of bag ever produced by Crumpler is kept in accessible files.

This allows models to be edited and changed quickly without delay, saving time and mistakes.

Human resource The creative talents of the design team are the key inputs. In the future, they aim to attract international designers for

future expansions.

customers Crumpler encourages feedback from its customers. They monitor blogs and message boards to see demands for new

products and to improve existing ones.

Facilities Crumpler started as a small shed in the rural suburbs. It then moved to a warehouse. Now they have a designing studio in

Ballarat and the major warehouse in Melbourne.

Transformation processesOf the 4V’s which V is the most significant for Crumpler? Variety. Crumpler uses the batch type for its production. They are required to produce a variety of models, styles and sizes. Each model of bag will need to be made in different sizes and colours. The batch method allows them to produce a huge variety of many products. It also allows them to add different styles or models when they want to.

Sequencing and scheduling

The aim to have products out as fast as possible. Clear scheduling allows them to have its new products available to consumers. Each task needs to be analysed to determine the fastest way of getting things done.

Outputs

Customer service Crumpler provides a high level of service that allows any questions about issues after the sale. This is done online or at retailer

stores. Store managers are well informed of all their ranges and thus it allows them to provide quick customer service to consumers.

Warranties Crumpler provides a lifetime warranty on zippers, buckles, fabrics and bindings. Their warranty is called “Til death do us apart”

Operations strategies

Performance objectives Quality is the most important to Crumpler. Their products last long and are of high quality. Speed is an objective of Crumpler. Recently CAD and CAM has increased the speed of operations and the time it takes to get bags

from the warehouse to retailers. This reduces delay and costs. Dependability is the reliability of the product or service. The company has a reputation for having long lasting products. They will

not break down and products will always be available in their stores. There is also dependability in supply and delivery. Crumpler always fills orders and distribute to retailers on time and web orders.

New product design and development Crumpler is always improving its products and developing new bags. With the release of the Apple iPad, there was the making of

the Herbus and Fur Bags. Recently, they upgraded their zippers. The “Vislon zipper” was covered with water repellent. This made an irritating sound to

customers, so a silent option was made. The Velcro fasteners were updated so that the bag can be closed using two closures and the cover was under the Velco. This

meant that it was more efficient and there were less chances of ripping.

Supply chain managementHow has crumpler improve its supply chain management? The supply chain management has been outsourced to two German partners. This has allowed the supply chain management to improve by speeding up the delivery of products from warehouse to consumers, planning current inventory levels and managing damaged goods returned by customers and distributors. The operations has been more global, warehouses have been based overseas.

OutsourcingWhere and why does Crumpler outsource its manufacturing? Crumpler outsources its manufacturing to Korea and Vietnam. Recently, this it was in Melbourne. This was done as Vietnam provided cheap labour, made good quality products and had a reliable supply.

Technology Is crumpler’s technology new and cutting edge or tried and tested. Crumpler’s technology is tried and tested. The core inputs like

the nylon and zippers were developed in the 1930’s. Explain how CAD is used by Crumpler to develop new products. Computer programs are used to develop the design patterns on

the bags. In the program, they can set the material inputs, size, shape and even colour. They can be inputted into the program and the robots will cut the sizes and padding just as they like it. This saves materials and increases efficiency.

Inventory management system Which inventory management system does Crumpler use and why? FIFO is used at Crumpler. There is the assumption that the

first stock that has been purchased and is the oldest will be sold first. This prevents old stock becoming obsolete and building up. More importantly, stock has to be available as promoted.

Quality management Crumpler has a performance objective of the highest quality- explain how crumple achieves this objective. Bags are regularly

checked and inspected to check for any defects. However quality assurance is heavily relied on, their factories are certified with an ISO 9002 which means quality is assured. Also, zero defects is the aim for them.

Change at crumple Explain the restraining forces and driving forces at crumple and how it moved towards change. The driving force is to be debt

free, but the restraining forces are job losses. Many jobs were lost when they outsourced overseas and reduce manufacturing locally. When the design technology was updated, local jobs were lost.

Global factorsSummarise and explain how global factors (global sourcing, economies of scale and scanning and learning) have helped Crumpler to achieve the success it enjoys.

Crumpler has begun obtaining its inputs from countries that specialise in it. Zippers and buckles were manufactured in Vietnam while, Nylon was made in china. Sheets were imported from Taiwan. By doing this, costs can be reduced as there is a large supply of those inputs overseas.

Crumpler has increased its capacity through expanding globally. The Vietnamese manufacturers had produced bags for similar businesses under the same roof, but increasing its production. This has allowed them to reduce costs, and this reduces costs and increasing profits for Crumple. By doing this, they have been able to increase production from 300 bags to 1,000,000 units.

To scan and learn about what competitors are doing, Crumpler keeps up to date about travel goods trade events in Europe and USA. Unfortunately, other companies have begun to copy them.

Topic 2- marketing

Interdependence of marketing and other key business functions The marketing strategies are dependent upon the developments in operations which allows it to make new and innovative

products. The operations department must give information to the marketing department on what is being produced before it can be

marketed.

Types of market Crumpler originally produced messenger bags in the mass market. Crumpler has begun market segmentation (demographic) to produce other type of bags such as camera and laptop bags. The ranges of bags are targeted at 18–35-year-olds, through the use of giving their bags names, e.g. The seedy One, The old

Banger.

Competition Crumpler has competitors in their different ranges of bags, e.g. camera and luggage bags. They have been able to combat competition through superior design and quality, giving them a competitive advantage over the

competitors. For example Crumpler’s high quality and design in the bags allow them to continually keep and expand their customer base.

Crumpler’s success has meant that copycat and counterfeit goods are beginning to appear. Crumpler is setting up special arrangements with customs offices around the world that monitor ports for counterfeit goods.

Sales outlets and pricing Crumpler’s products are exclusive to their stores, so they can set their own pricing.

In America, there are many dealer networks. Crumpler has set an manufacturer’s suggested retail price in their contracts to which retailers agree to stick to the price allowing them to maintain prices.

Marketing strategies Crumpler’s marketing strategies are informal and because their approach to business to have fun and laugh Crumpler has always been known for its innovative, individual approach to marketing, leading to consumer perception of unique

and well-made bags made by a company that doesn’t take itself too seriously.

Early days- guerrilla marketing In the early days, they would driving around and stencilling their logo on any surface. This generated much mouth to mouth

publicity, it was cheap and adventurous.

Demographic targeting Crumpler targets their products at the 18–35-year-olds who enjoy the casual and mocking approach. They have advertised via street magazines and free music magazines. They reach students via sponsoring university and college

events, parties and competitions and magazines. Their logo was shown at the Melbourne Fringe Festival guide. They made a 60 second cinema ad that ran in an art house in Melbourne. Other methods of advertising include:

o short videos on YouTubeo paying apple growers to put the Crumpler logo on the stickerso sponsorship of the SBS program Rockwiz

o sponsorship of a nude footrace

“Beer for bags” Each year, across all of its markets (excluding Adelaide and Brisbane), Crumpler encourages its customers to pay for their products

through beer. This creates controversy on television shows which brings world-wide publicity in Australia and overseas.

Trade shows In 2005 Crumpler decided to exhibit at the 2005 International Consumer Electronics Show – the largest electronic and technology

show in the USA. It costed 30,000 dollars. They hired a University of Melbourne architecture student to design a low-tech environment consisting of 55-gallon oil drums and

plywood walls and floors painted with green chalkboard paint. There was lots of space for people to write on the walls, it was interactive.

It was so impressive that Crumpler signed 3 companies for projects.

Ethical influences on marketing the ‘beer for bags’ campaign is encouraging the illegal trade of alcohol and promotes drinking amongst the 18–35 demographic. They were not promoting drinking among their customers: ‘we’re taking beer off the streets and giving you the bags’. In Brisbane

and Adelaide, police closed down the sale, arguing that Crumpler were in breach of liquor licensing laws.

Market research Stuart Crumpler bag designer and co-founder working as a bicycle courier designed the bag for his own use. Other couriers saw it

and started using the bags. He received feedback on what did and didn’t work. Today, the development of Crumpler bags is often determined in-house through its team of designers, who are encouraged by

management to bring ideas on board. Consumer input into the process is encouraged through forms available online and in-store.

Consumer laws Crumpler’s warranty service is testament to the quality of their products. The business believes that their warranty should reflect

the quality of the product and customer confidence in the product. If the crumpler bags fail while they are in the bag’s owner, it will be replaced or repaired.

Topic 3- finance

Role of financial management

Strategic role of financial management Roper and Miller had identified a niche in the communications market that was not being addressed by existing businesses in this

market. They had not undertaken enough research or planning to establish its viability. The new business offered mail delivery for 35 cents, which cut 3 cents off the price of Australia Post deliveries. Mail sorting was

completed in the back of Miller’s car, a Mazda 808 wagon. Using only internal sources of finance, Roper and Miller reinvested surplus funds and expanded their business by moving to a

small shared office. This minimised expenses by subletting floor space and sharing one premises with other small businesses. This was taken on a

month to- month basis, making the arrangement very flexible and requiring only a month’s notice to move out of this office.

Influence of government Unfortunately, this business breached the Australia Postal Corporation Act 1989 (Cth) amended 1995, which protected Australia

Post from competition (this was a government-established monopoly) and City Mail was forced to close its present style operations.

They could only legally compete with Australia Post if their delivery charge was a least 10 times the cost of a standard letter, so they changed the operations to parcels and a courier service. They also changed the legal structure to a private company which gave them protection.

Objectives of financial management

Growth Miller and Roper distinguished themselves from other businesses by wearing pink lycra outfits and used bicycles. Within a year

they had grown to a full-time staff of 40 couriers. The goal was to be able to provide employees with a suitable wage and to cover business expenses.

Profitability Operations expanded to include Sydney, with an annual turnover of 3 million.

Liquidity The courier business provided monthly invoices to their clients and paid wages to their employees each week. With a monthly invoice they had a poor control over accounts receivable and clients took 60 days to pay. This meant it took them

2 months to pay their accounts. This presented a huge a problem as they were not able to gain a loan.

The processes of financial management- planning and implementing

Financial controls Roper and Miller started a new courier service called Minuteman Messengers with an partner who managed the accounting and

administration through an initial bank loan of $30 000. This resulted in a greater understanding of the amount of cash available for expenses and a more solid basis for determining the timing of cash inflow.

This was the only debt finance secured by them.

Financial management strategies

Working capital management, liquidity The initial loan allowed them a buffer(shield) between payment of wages and the receipt of funds from the payment of accounts

by clients. Slow paying accounts were quickly followed up. There was no stock or inventory as the service was performed daily.

Profitability management

Cost controls Fixed expenses such as the payments for office space and uniform costs were limited. The couriers provided their own bicycles. Wages depended on the hours. Crumpler attempted to increase efficiency of the bag itself.

Expense minimisation Costs were kept to a minimum, the bags were made in their parents garage. The Minutemen Messenger couriers were used to test the bags and each new batch incorporated the courier’s suggestions for

improvement. In 1995, when Crumpler registered it as a private company, under the name of Crumpler Proprietar Limited, demand increased.

Their operation moved to a small factory in Victoria where they sold bags to people who ventured in off the street and small bicycle shops. With the sales, they bought better equipment and improved materials.

Global financial management In 1998, they took the bags to a trade centre in Germany and were given orders. Consequently, they began selling the bags in

batches to outdoor, street wear, bicycle shops. Roper and Miller sold Minutemen Messengers. The money was used as startup capital. This was well timed as email was just

introduced.

Cost controls 6 staff was working at the factory with some work outsourced. To increase efficiency and to be cost effective, the manufacturing section was moved offshore to Vietnam. This allowed the

Crumpler team to use their skills and expertise in design, marketing and sales. Crumpler consequently had an arrangement with the Vietnam factory, where crumpler puts in five major orders per year.

The Ballarat factory had financial troubles so it was closed down.

Growth- vertical integration Crumpler went through forward vertical integration and starting setting up their own retail stores. This controlled the distribution

of their products. They went global and opened stores in New York, Singapore, Brisbane, Adelaide and Kuala Lumpur. Later on they entered a joint venture with a standing distributor to set up stores in asia.

Private equity 2 German investors, joined the private company on an equal share basis. They both then combined and expanded to become the

European distributors. Crumpler supplied the design, brand and marketing skills while the germans supplied the distribution, sales and manufacturing.

Growth strategy In 2005, crumpler exhibited at the International Consumer Electronics show with $56 500 to introduce major US retailers of

electronic equipment to its products. They eventually signed 3 companies for $1.2 million in revenue. The trade show also allowed them to meet retailers, agents, importers and distributors.

Methods of international payment Payments in advance are used by Crumpler for international suppliers. Thus their financial manager can negotiate deals that

benefit Crumpler’s financial position. Crumpler’s sales, purchasing of materials and in USD. Payments are made by wire transfers (online) from their bank accounts to Crumpler’s.

Record systems

Crumpler has hired the business “Reactive” to design an online system that will be able to be used for sales processing and inventory management for a dozen different regional offices. This integrated payment systems to inventory systems in several languages.

This made record keeping much more efficient and fast.

Conclusion The majority of business activity is financed directly from cash flow Thorough and continuing market research enables Crumpler to be aware of all competitors, relevant suppliers and market prices. Each department has regular meetings and constant reviews of design, cost controls Specialist staff are employed in design, retail and marketing. They focus on the product improvements, development of new

products and plans for new stores.

Topic 4- Human resources