EBags: Synopsis and Purpose

Operations Management unit 8, bags, page 515 February 21, 2011 bags Synopsis and Purpose Bags was established in the spring of 1998 with Jon Normal with four friends who each invested $50,000 of their money to start a company.

They wanted to cash in on a domestic luggage market of $128 billion dollar industry. By late 1998, they were broke. Benchmark Capital broke the ice by investing, shortly after they had total investments of $6. 8 Million. Bags was also one off few to survive the dot com crashes and turn a profit.

With this, they went from offering six brands to in a few short years offering two hundred brands and more than 8000 products. Discussion Questions: 1 . Contrast and compare the supply chains required for the private label bags and those drop shipped directly from manufacturers. 2. If bags were to enter the footwear business, what new supply chain management capabilities would be required compared to the present bags market? 3.

If bags were to enter the European market for luggage, what challenges does this present for supply chain management? 4.

From a business perspective, what decision should Jon Normal make regarding the European expansion and the footwear markets. What is the best way for bags to leverage its strengths and profit from the continued growth of e- commerce? Analysis Question 1 . Contrast and compare the supply chains required for the private label bags and those drop shipped directly from manufacturers.

The search for Improved supply chain Integrity and greater consistency In the quality of private- label products-coupled with the need to squeeze costs out of the supply Hahn through greater control (either, directly, through grower/cooperative partnerships or, indirectly, through pre-packers with their own supplier networks) has resulted in the rationalization of the supply base, with retailers seeking to deal with fewer, larger, technically efficient and innovative suppliers. Bag’s decision for developing a private label was crucial in offering a low cost high quality alternative to buyers.

By sourcing the manufacturers of the private label through a network of low-cost Asian manufacturers and tight inventory management, Bags could satisfy the cost conscious consumer while still enjoying a healthy profit margin. Drop shipping Is not cost effective with private labels. This spurred a need for Inventory In order to keep costs low on their private labels. Whereas with designer brands, It Is crucial to use drop slipping In order to avoid high costs of holding expensive inventory. Question 2.

If bags were to enter the footwear Dustless, want new supply canal management cap I t D II less wool a De required compared to the present bags market? One major hurdle that would have to be dressed with entering into a new market would include the website being revamped.

Advertising would be the next big challenge, because when you think of bags, you do not think of shoes. They would have to change that mindset. Next would be increasing their level of contacts and developing inventory. It would be easier to acquire a company already in the market and transition them over to bags. Then you would be back to the idea of private label vs..

Signer and inventory vs.. Drop shipping. This all falling on the heels of successful campaigns launched by ADS, Famous Footwear, and Valleys to offer a wide range of shoes at a significant discount. Question 3. If bags were to enter the European market for luggage, what challenges does this present for supply chain management? There would be several barriers to overcome.

One of which would be the language barriers associated with shipping packaging labels. In Europe they have different requirements for shipping. Brand awareness would be another hurdle as what is a well-known brand here is not necessarily the case in Europe.

Also maintaining the PEN interface would provide a halogen. Web page administration would need to be addressed with sensitivity to culture and language. Drop shipping vs.

. Inventory would need to be addressed as they would need warehouses over in Europe. This would be pertinent in providing the same level of service and speedy deliveries we receive here in the U. S. Question 4.

From a business perspective, what decision should Jon Normal make regarding the European expansion and the footwear markets. What is the best way for bags to leverage its strengths and profit from the continued growth of e-commerce?

First wing to consider is there even a market to break into. The market being Just as fragmented as it was in the U. S. When they started and with E-commerce on the rise in Europe, and 190 million internet users (in 2002) it should definitely be something to consider.

Footwear being a 40. 7 billion dollar market and the top five footwear makers only holding about 8% each it would certainly make for something to think about. The best way to leverage their strengths would be to continue to offer the same service with great prices and customer service coupled with intuitive acquisitions to offer more for less.