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. SCM203 Unit 7A Case Study Version 1.0 Page 3 of 5 "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.
What do you think of thompson’s idea to outsource the manufacturing of the t2?

Answer 1

Thompson's push for semi-customization through outsourcing could meet market demands but brings risks and operational challenges. WEGL would need to balance benefits with the costs of changing production strategies. A thorough cost-benefit analysis and strategic planning are essential.

Step-by-step explanation:

Thompson's idea to outsource the manufacturing of the T2 could be a strategic response to the need for introducing a semi-customizable product line in the face of stagnant sales. Outsourcing can afford War Eagle Golf Ltd. (WEGL) the required flexibility and capability to meet diverse customer preferences without the burden of reconfiguring their mass production operations. However, it also introduces risks such as potential quality control issues, dependency on external suppliers, and possible loss of intellectual property.

Understanding the golfing market's tendency towards personalization and the success of competitors in offering customizable options at a slightly higher price point, Thompson's push for semi-customization reflects a necessary innovation strategy. The CEO is looking towards a flexible manufacturing strategy to cater to a market that highly values personalized equipment.

In terms of manufacturing complexities, Butch Pearl, vice president of manufacturing, has highlighted legitimate concerns regarding inventory, forecasting, and operational adjustments needed to shift from a Make-to-Stock (MTS) to a potential Make-to-Order (MTO) or Assemble-to-Order (ATO) production model. While Thompson's proposal might lead to a higher value proposition and possibly increased sales, the change would require careful planning and a potential overhaul of WEGL's supply chain and production strategies.

Ultimately, the final decision should balance the benefits of meeting market demands with the operational challenges and costs associated with the change. Whether outsourcing or revamping the internal production process, a detailed cost-benefit analysis and strategic plan are crucial for successful implementation.