Case Analysis: Supply Chain Outsourcing at DB Toys Harvard Case Solution & Analysis

Case Analysis: Supply Chain Outsourcing at DB Toys Case Solution

Introduction

    DB toys is a giant toys manufacturing company with having sales in over 15 countries across the world. The company is second tier based company. The sales were recorded with an amount of 1.5 billion in 2000 which was dropped from almost 1.7 billion in 1999. However, the company’s market position was good, and the company was earning an above average margin.

    However, the company was founded by Dave Bibb, which was given the name to the company DB toys. The founder of the company started to manufacture toys in the early 1950s which were based on popular comic’s characters.

     The company followed a quick growth track and earned a goodwill in less than ten years of the startup at that the time Dave retired from the company in 1975 with a well-reputed name in the industry, however, he later sold the company to a group of investors which transformed the company into a public limited company.

    The dynamics of the toy industry were changing as new entrants were setting new trends in the industry by following super low-cost strategies, providing a final product at lower prices, and charging lower profits from the customer in pursuit of larger sales volumes.

Problem Statement and Dilemma

    The company was facing several problems as mentioned in the case but all of the problems were due to few root causes. However, the main reason for other problems was that the sales of the company were declining, and the company was losing its market share and market position.

    The sales of the company were dropped from 1.7 billion to 1.5 billion and the company also lost a major portion of its market share. The company was spending almost 30 million on IT and specifically on the supply chain, however; this budget was almost the half of the overall IT budget, and the CEO was very suspicious about the future of the company because of the said problems. Finally, the company was considering to outsources its supply chain activities to Inflection, which was a supply chain consultancy firm. The reason behind this consideration was to reduce the supply cost.

Overview of supply chain process at DB Toys

    Referring to figure 1 which has been taken from the case, it can be seen that the company is following a very sophisticated supply chain strategy since, there are four backward channels from which the company is procuring material these channels include plastic supplier, paint supplier, fabric supplier, packaging material supplier.

    In the second phase the company procure this material from four different channels, manufacture goods from it and then supply these goods to two different distributors, these distributors supply toys to different retailers, and these retailers provide and sell them to customers. In the second phase, the strategy becomes more critical as there is involvement of many forward channels which are not easy to evaluate

Outsourcing Overview and Benefits/Risks from Outsourcing

    The outsourcing pyramid for Inflection is mentioned in figure 2 which shows that the company provides three different types of outsourcing through which the fourth type of service is made which the company provides to its customers.

    The first category is the technological infrastructure outsourcing which means that the company only provide services for the technological infrastructure working as a technology outsourcing partner.

    The second category includes the business application outsourcing under which the company acts as the application development partner by providing business applications which are useful for the company to reduce the operational and business cost.....................

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