Question

War Eagle Golf Ltd. War Eagle Golf Ltd.

(WEGL) manufactures the Titanium Tiger (T2 ) driver, a $99 copycat of a far more expensive golf club from a well-known brand. The T2 driver is manufactured at the company’s small Opelika, Alabama factory and is shipped to major sporting goods retailers. WEGL uses a mass production strategy to gain economies of scale and high labor productivity. This strategy is coupled with a MTS assembly process, and goods are produced in anticipation of demand. The company has experienced a sales slump over the last three quarters. In response, WEGL sent their sales team to the World Golf Expo, a major trade show. The goal of this trip to the Expo was to boost awareness of the T2, gain retailer feedback, and generate orders. The sales team set up a display booth and had plenty of literature to distribute. The trip wasn’t successful from an order standpoint, but the sales team gained valuable insights from the Expo attendees. At a post-trip meeting, the following information was shared with WEGL executive management: • Retailers said that having only one model available—a right-handed, 43-inch, 9-degree loft, steel shaft driver with a tacky grip—is like having a one-size-fits-all shirt. It doesn’t fit many people well! That limits the market appeal for a product that customers are willing to spend higher amounts of money for a tailored product. • Competitors at the event were offering semi-customizable clubs similar to the T2at a $149 price point. Options included right-and left-handed clubs, three different lofts, three different grips, steel or graphite shaft, and six shaft length/flex combinations. • A few retailers commented that sales would explode if WEGL could offer a variety of driver configurations at a $129 price point. Bruce Thompson, the company CEO, was intrigued by the customization angle. He liked the idea of a higher price and believed that the input component costs wouldn’t be much higher than the current model of the T2 . "Let’s get started right away," he said. "But that will add great complexity to our production and supply chain operations,"replied Butch Pearl, vice president of manufacturing. He noted that the company would now have to manufacture 216 different models based on all the possible configurations of club head, loft, grip, shaft type, and shaft length/flex options. "Creating a forecast will be a nightmare and we’ll have to hold finished goods inventory of every model," he added. "Well, Mr. Pearl, you’d better figure it out," replied Thompson. He went on to talk about the need for WEGL to adopt a more flexible manufacturing strategy. "Our customers want clubs built to their game and we need to be responsive! Offering semi-customized clubs sounds like a great idea to me," he added. "If that is too much to ask, then I may need to think about outsourcing our manufacturing and your job!" "I want your production plan on my desk in one week," said Thompson as he walked out of the meeting.

a. What do you think of Thompson’s idea to outsource the manufacturing of the T2?

Answer 1

Outsourcing could quickly allow WEGL to offer customized T2 golf clubs but poses risks to quality and brand integrity, while in-house adaptation to mass customization can be costly but may increase control and long-term brand loyalty.

Step-by-step explanation:

The idea to outsource the manufacturing of the T2 golf clubs might address the issue of production flexibility and product customization, but also carries risks such as reduced quality control, potential intellectual property concerns, and the loss of in-house expertise. Outsourcing manufacturing can lower production costs if the economies of scale are achieved and might be a quick solution to offering a wider range of products without a significant upfront investment in new production processes and training. However, transitioning from a mass production to a mass customization strategy internally could better allow WEGL to control quality, lead times, as well as strengthen its brand image amongst consumers by leveraging the 'made in USA' appeal.

Butch Pearl’s concerns about increased complexity in manufacturing and the nightmarish task of creating accurate forecasts for hundreds of different product configurations are valid. These challenges, which come with mass customization, indeed demand advanced planning systems, sophisticated inventory management, and possibly a shift to a build-to-order or an assemble-to-order production process to minimize inventory costs and respond swiftly to customer demands. Such a strategic shift might require significant investments in technology and staff training but could provide a competitive edge in the long run, enhancing customer satisfaction and brand loyalty.