Case Study: Crayola's Supply Chain Design and Strategic Implications

This case study assignment delves into Crayola's supply chain management, analyzing both internal and external pressures affecting its design, particularly for products like Colour Wonder and Washable Deluxe Painting Kit. It reviews the strategic implications of Crayola's supply chains, comparing and...Read More

CASE STUDY ASSIGNMENT 1

Table of content
Introduction......................................................................................................................................2
Describe the four external and internal pressures on supply chain design as they relate to
Crayola’s supply chains for Colour Wonder and Washable Deluxe Painting Kit...........................2
Review the strategic implications of Crayola’s supply chains........................................................5
Compare and contrast these two supply chain designs from perspective of the decision factors
and pitfalls for outsourcing..............................................................................................................6
Inventory calculations......................................................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

Introduction
Supply Chain management is a very important aspect within business operation to make sure that
the company is able to operate and meet the marketing demands. It is also important to consider
that through the use of an efficient supply chain management, a company is able to get raw
materials from suppliers and render the finished goods to the customers. Hence, it can be said
that a good supplychain should be maintained by an organization to make the company acquire
the ability to meet up the deliverables of the market. In this assignment there will be a discussion
over Crayola formerly known as Binney and Smith Company which is an American company
operating in the stationery and handicraft industry. The company sells non toxic children's safe
product of stationery such as crayons, colour and oil paints. It Operate in America, Canada and
Australia and is looking to expand in Asian continents which is why evaluation of supply chain
is essential to determinewhether the following will be successful or not.
Describe the four external and internal pressures on supply chain design as
they relate to Crayola’s supply chains for Colour Wonder and Washable
Deluxe Painting Kit
There are both internal and external elements which are going to affect supply chain design of a
company like Crayola for its expanding in to the China market. The external pressure will be
created through external forces which can have adequate amount of impact created through
suppliers. Other internal pressure can be created by the management itself in order to construct a
prominent supply chain design (Chin, Tat and Sulaiman, 2015). Crayola Products such as Color
Wonder and Washable Deluxe Painting Kit are front line products of the company which have
successful in the company's domestic and international market hence supply design of these
products should be accurate in order to ensure that there is effect supply chain design
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implemented for operation of the products and to meet the demand of the customer and retailers
on time as per the reputation of the firm.The external pressures which will be on the supply chain
design of the company are as follows:
Suppliers: Suppliers and the availability of suppliers within the market of expansion play an
important role for determination of the supply chain design within a market. Supplier are the
main source through which the company will be able to get raw materials for its manufacturing
or packaging process, which is why suppliers are an important factor within the supply chain of
any company (Wilhelm, Blome, Bhakoo and Paulraj, 2016).
Distributors: As the company is new in the market it will have to establish its market in the
region in this regards distributors are very important they are the one which will help the
company in supplying finished good from the manufacturing point to retailers and customers. If
the distributors change or there is unavailability of trustable distributors it will be hard for the
company to create an accurate supply chain design.
Customers: Since, the demand of the products like Colour, Wonder and Washable Deluxe
Painting Kit in Chinese market is unknown, there is no proper way to predict the way in which
customers will react and demand for such product. Hence, customer are an internal force which
will be the supply chain design of the company.
External risk factors: In every market there is risk, which is associated with the company’s
operating areas, including the risk economic distress and others as well. In the Chinese market
the market is unpredictable due to the inconsistent and unfavourable interpretation of regulation
(Export.gov, 2019). Hence, in case of inflations and other economic imbalance there will be
effect on Crayola’s Supply chain design.
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Now there are some internal factors as well which will affect the overall supply chain design of
Crayola in the new market and they are as follows:
1. Company’s strategy: Now it has been very evident from the case the strategy of
expansion in China will decide the fate of the company’s supply chain in the new market.
The company has two option one in which it will produce goods in US and export its to
the China Market and the other is that the company will manufacture its product in China
Itself. In both the scenario the supply chain design will be different. If the company goes
for the first option it will not have to look for suppliers in china whereas in the second
option the company will have to look for suppliers in China to get raw materials. Hence,
as suggested by (Mangan, Lalwani and Lalwani, 2016), company's decision will always
need to tend the affected supply chain design of the company. This aspect will certainly
allow one to follow the current market trends.
2. Management: The management of the company plays a vital role in the supply chain
process of a company. It can be said that through management the overall supply chain
design is managed hence the management will have effect on the supply chain design
(Christopher, 2016). This is because supply chain design will determine the extent to
which the company is looking to expand their supply chain through which the company
will determine the ways in which the products will be render to the market in lieu of
meeting the market demand in a prominent manner. The management will decide the
operational activities of the firm which then will further establish the procedures of the
supply chain hence it has become very clear that management will have an crucial impact
of the supply chain design of the company.
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3. Workforce: Workforce of the company is very much an evident parts of the company's
manufacturing and marketing process. The workforce of the company determines the
effect of the firm in terms of its operation and supply chain management. If the workforce
of the company is efficient then the supply chain design will also become effective and
the company will be able to effectively deliver product on time which will create its good
reputation in the new market. It can be said that the fate of the supply chain design will
mainly depend on way the workforce of the company operates in. The efficiency of
workforce will have a significant impact on the supply chain expansion within the market
(Noe, Hollenbeck, Gerhart and Wright, 2017). It is because, if the demand and market of
the company grows, there will be high expectations with the workforce of the firm to deal
with the changes. Hence, it can be said that workforce will have a significant amount of
impact on the company supply chain design.
4. Internal risk: As explained above there are risks associated with the company expansion
in a new market it can be said that there are internal risk as well tend to affect the
company's supply chain internally (Lindemann, 2016). Breakdown of manufacturing is a
risk which the company will have to consider as it can happen causing disruption in the
supply chain line. The company risks of various incidents and accidents within the firm
operations, that will evidently affect the supply chain of the company, causing problems
in the supply chain. Hence, it can be said that internal risk is very evident to have an
effect of the supply chain design of the company.
Review the strategic implications of Crayola’s supply chains
The Crayola Company follow a basic supply chain system in which it is communicating with the
customer in a very simple way. The company has an unique supply chain for each of its product
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which helps the company in efficient on time delivery of the products to their customers. The
company supplies its products to the customer on time without any obstacles. The company by
following a basic supply chain is able to communicate easily with their customers. The suppliers
of Crayola Company deliver their products to the customer and client. The Crayola Company
maintain a standard when it comes to their products (Crayola.com. 2019). The Crayola Company
makes products of crayons, slates, pencils and colours which are not harmful for kids. The
Company knows very well that kids sometimes eats crayons and colours so they make products
which are not harmful and toxic. The company in terms of quality does not compromise with
their quality of products. The company holds a good market position as it fulfils the demands of
their customer and satisfies their customers. The Company plans their inventory level for the
entire one year beforehand which helps in balancing relating to their cost. The Crayola Company
deals with both large and small inventories. The company works on their supply of products and
demands of their customers. The company deals with other companies like Walmart and Target.
The Company maintains a proper customer service where they provide on time service and on
time guarantee of their products. The companies at present manufacture and sold their products
in five different countries which includes United States America, United Kingdom, Canada,
Mexico and Australia. Among these countries the maximum sale is in North America which is
around 86%. The companies also launch some of their famous product among which there is a
washable deluxe painting kit containing water colours, paint brushes, sponges and packaging box
(Christopher, 2016). Thus it can be said that Crayola has both the efficient and responsive supply
chain of management.
Compare and contrast these two supply chain designs from perspective of the
decision factors and pitfalls for outsourcing
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The Crayola Company has two options in terms of supply chain and manufacturing. The
company can choose the manufacturing in America and create their supply chain China. The
advantage of manufacturing their product in America is that the Company does not have to share
their formula which they use for making their product toxic free. The Crayola Company makes
chemical free products like crayons, watercolours, pencils etc. which is not harmful or toxic even
if any children eat that. With the advantage the company also have disadvantage of
manufacturing their product in their native land. If the company will manufacture their products
in China then they will not have to pay high taxes which they pay for supplying their products to
China (Mangan, Lalwani and Lalwani, 2016). Another option is that the Crayola Company can
manufacture and supply their product in China. In this the advantage is that the company will be
able to create a new supply chain management and they do not have to pay any extra tax which
they pay for supplying their goods. The disadvantage of manufacturing their products in China is
that China will come to know about their formula of making chemical and toxic free products
which the Crayola Company make for the children. The disadvantages in china would also be in
form of trade policies, which are sometime rigid and strict as per political changes (Ding, 2016).
Once the formula is revealed to Chinese Counterpart after some years of working together, it will
open its own personal company where the company will face a tough competitor. The company
manage the supply chain management properly when it comes to their quality of products and
time management. The Crayola Company maintains a good quality of products and deliver the
products to their customers on time (Crayola.com, 2019).
Inventory calculations
a.
Part Average Level Unit Value Total Value
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Number
1 15000 $ 3.00 $ 45,000.00
2 2500 $ 5.00 $ 12,500.00
3 3000 $ 1.00 $ 3,000.00
4 5000 $ 14.00 $ 70,000.00
5 4000 $ 18.00 $ 72,000.00
6 2000 $ 48.00 $ 96,000.00
7 1000 $ 62.00 $ 62,000.00
Average Aggregate Inventory Value $ 3,60,500.00
B. Average Weekly Sales at cost = $ 3,410,000 / 52
= $ 65,577 per week
Week of supply= Average Aggregate Inventory Value / Weekly sales (At cost)
= $ 360,500 / 65577
= 5.5 weeks
C. Inventory turnover = Annual Sales at cost / Average Aggregate Inventory Value
= $ 3,410,000 / 360,500
= 9.5 turns
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Conclusion
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Concluding in the light of above context it can be said that supply chain management through
effecient measure and decision making will determine Crayola’s fate in the New China market.
The company will have to decide the terms on which the supply chain of the company will be
built following which the company will establish itself within the market. The company will
have to ensure that the effect of the firm in US is maintained in the newmarket as well which will
help the company in growing within this new market. Using effective supply chain management
will help the company in delivering at accurate time increasing its brand image within this new
market.
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References
Chin, T.A., Tat, H.H. and Sulaiman, Z., 2015. Green supply chain management, environmental
collaboration and sustainability performance. Procedia Cirp, 26, pp.695-699.
Christopher, M., 2016.Logistics & supply chain management. London, UK. Pearson,
Crayola.com. (2019). [online] Available at:
https://www.crayola.com/support/~/media/80FBB7457B6D493A80ED4FE400674795.ashx
[Accessed 24 Mar. 2019].
Ding, S., 2016. A Concealed Regionalization without Historical Roots: A New Form of
Regionalism in Rising China’s Foreign Policy. In China and the global politics of
regionalization (pp. 45-58). Routledge. London
Export.gov. (2019). China - Market Challenges | export.gov. [online] Available at:
https://www.export.gov/article?id=China-Market-Challenges [Accessed 24 Mar. 2019].
Lindemann, E., 2016. Value sharing in customer-supplier relationships.
Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain
management. John Wiley & Sons California
Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource management:
Gaining a competitive advantage. New York, NY: McGraw-Hill Education.
Wilhelm, M.M., Blome, C., Bhakoo, V. and Paulraj, A., 2016. Sustainability in multi-tier supply
chains: Understanding the double agency role of the first-tier supplier. Journal of Operations
Management, 41, pp.42-60.
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