Case study: Crumpler

Topic 1- operations

Product offered
o heavy duty bags for bike couriers

Role of operations management
Aim
o to differentiate the businesss products from its competitors rather than using a cost leadership strategy.

Crumplers aim has been achieved through:
o a better quality product
o a vast variety of products in its range
o incorporation of new technology
o Clever design

Influences on Crumplers operations
Globalisation
Globalization has allowed crumpler to sell to more countries and markets. The expansion has allowed them to open stores in New
York, Toronto and Singapore.
Crumpler bags are not available in Greece, Japan, and Hong Kong, China.
Its exports are at 6 million or 50% of total sales.
Recently, they negotiated with Apple, allowing them to provide their bags to more consumers.
Crumpler can outsource its manufacturing and now has a global supply chain. Operations costs have reduced as the other
countries had lower costing inputs and labour.

Economic
There have been many changes recently,
o the cost of oil has raised highly-due to the fact that crumplers bags using lots of nylon in its productions, its costs have
risen highly.
o the economy of Europe and Asia have fluctuated-due to the economic slowdown and the global financial crises, sales
globally have dropped immensely.
o cost of labour in Asia has risen-Asias labour

Technology
There have been recent developments in the production of clothing and communication. Computer aided manufacturing and
designing was introduced allowing efficiency to be increased.
Headquarters started using email in its communication to allow faster transmission of messages within the company.
Three dimensional designing software allowed them to create new products virtually and, it could be viewed from a few
perspectives.



Design and manufacturing process
All products are designed in Melbourne.
Where does Crumpler purchase its materials from? Leather from Melbourne, Nylon from Taiwan and South Korea, canvas from
china, clips from Japan, webbing from China, Luggage handles from Taiwan
Crumplers first and foremost criterion for their design team is strength and practicality. They use only the strongest materials,
e.g. the shoulder straps are made from webbings used in cranes which can lift cars. The zippers are of high quality and will not
break.
Quality expectations
Crumpler knew that consumers would use the bags to hold precious technology so, the highest quality was needed.
Crumpler bags are water resistant due to the nylon shell and the inner padding.
Customers expect quality from such a higher price.

Competition
Many of Crumplers competition cannot match their quality as they are made using lower cost inputs and materials. They are
made from lower quality nylon.
Their closest competition is Lowepro and North face.

Social and environmental sustainability
Crumplers bags are built so that they last longer and can be repaired. This means that not as much resources need to be used to
make as much bags for replacement.
Crumpler does not run their factories directly, it is subcontracted when labour standards are low. In their factories, they try to
improve conditions where workers work, and have an independent monitor.


Operations process
Inputs
Materials
The key material inputs are heavy-duty rip stop nylon and thread to construct the bags. Crumplers bags have a water-
resistant 900 denier shell.

A nylon ripstop nylon, which is super strong, lightweight, durable and resistant to fraying, tearing and ripping.

Information
Information from a parachute manufacturer enabled the business to start new stitching methods that added strength to
the bags.
Extensive data for the design specifications for every model of bag ever produced by Crumpler is kept in accessible files.
This allows models to be edited and changed quickly without delay, saving time and mistakes.

Human resource
The creative talents of the design team are the key inputs. In the future, they aim to attract international designers for
future expansions.

customers
Crumpler encourages feedback from its customers. They monitor blogs and message boards to see demands for new
products and to improve existing ones.

Facilities
Crumpler started as a small shed in the rural suburbs. It then moved to a warehouse. Now they have a designing studio in
Ballarat and the major warehouse in Melbourne.


Transformation processes
Of the 4Vs which V is the most significant for Crumpler? Variety. Crumpler uses the batch type for its production. They are required to
produce a variety of models, styles and sizes. Each model of bag will need to be made in different sizes and colours. The batch method
allows them to produce a huge variety of many products. It also allows them to add different styles or models when they want to.
Sequencing and scheduling
The aim to have products out as fast as possible. Clear scheduling allows them to have its new products available to consumers. Each task
needs to be analysed to determine the fastest way of getting things done.

Outputs
Customer service
Crumpler provides a high level of service that allows any questions about issues after the sale. This is done online or at retailer
stores.
Store managers are well informed of all their ranges and thus it allows them to provide quick customer service to consumers.

Warranties
Crumpler provides a lifetime warranty on zippers, buckles, fabrics and bindings.
Their warranty is called Til death do us apart


Operations strategies
Performance objectives
Quality is the most important to Crumpler. Their products last long and are of high quality.
Speed is an objective of Crumpler. Recently CAD and CAM has increased the speed of operations and the time it takes to get bags
from the warehouse to retailers. This reduces delay and costs.
Dependability is the reliability of the product or service. The company has a reputation for having long lasting products. They will
not break down and products will always be available in their stores. There is also dependability in supply and delivery. Crumpler
always fills orders and distribute to retailers on time and web orders.

New product design and development
Crumpler is always improving its products and developing new bags. With the release of the Apple iPad, there was the making of
the Herbus and Fur Bags.
Recently, they upgraded their zippers. The Vislon zipper was covered with water repellent. This made an irritating sound to
customers, so a silent option was made.
The Velcro fasteners were updated so that the bag can be closed using two closures and the cover was under the Velco. This
meant that it was more efficient and there were less chances of ripping.


Supply chain management
How has crumpler improve its supply chain management? The supply chain management has been outsourced to two German partners.
This has allowed the supply chain management to improve by speeding up the delivery of products from warehouse to consumers,
planning current inventory levels and managing damaged goods returned by customers and distributors. The operations has been more
global, warehouses have been based overseas.
Outsourcing
Where and why does Crumpler outsource its manufacturing? Crumpler outsources its manufacturing to Korea and Vietnam. Recently,
this it was in Melbourne. This was done as Vietnam provided cheap labour, made good quality products and had a reliable supply.
Technology
Is crumplers technology new and cutting edge or tried and tested. Crumplers technology is tried and tested. The core inputs like
the nylon and zippers were developed in the 1930s.
Explain how CAD is used by Crumpler to develop new products. Computer programs are used to develop the design patterns on
the bags. In the program, they can set the material inputs, size, shape and even colour. They can be inputted into the program
and the robots will cut the sizes and padding just as they like it. This saves materials and increases efficiency.


Inventory management system
Which inventory management system does Crumpler use and why? FIFO is used at Crumpler. There is the assumption that the
first stock that has been purchased and is the oldest will be sold first. This prevents old stock becoming obsolete and building
up. More importantly, stock has to be available as promoted.

Quality management
Crumpler has a performance objective of the highest quality- explain how crumple achieves this objective. Bags are regularly
checked and inspected to check for any defects. However quality assurance is heavily relied on, their factories are certified with
an ISO 9002 which means quality is assured. Also, zero defects is the aim for them.

Change at crumple
Explain the restraining forces and driving forces at crumple and how it moved towards change. The driving force is to be debt
free, but the restraining forces are job losses. Many jobs were lost when they outsourced overseas and reduce manufacturing
locally. When the design technology was updated, local jobs were lost.


Global factors
Summarise and explain how global factors (global sourcing, economies of scale and scanning and learning) have helped Crumpler to
achieve the success it enjoys.
Crumpler has begun obtaining its inputs from countries that specialise in it. Zippers and buckles were manufactured in Vietnam
while, Nylon was made in china. Sheets were imported from Taiwan. By doing this, costs can be reduced as there is a large supply
of those inputs overseas.
Crumpler has increased its capacity through expanding globally. The Vietnamese manufacturers had produced bags for similar
businesses under the same roof, but increasing its production. This has allowed them to reduce costs, and this reduces costs and
increasing profits for Crumple. By doing this, they have been able to increase production from 300 bags to 1,000,000 units.
To scan and learn about what competitors are doing, Crumpler keeps up to date about travel goods trade events in Europe and
USA. Unfortunately, other companies have begun to copy them.



Topic 2- marketing
Interdependence of marketing and other key business functions
The marketing strategies are dependent upon the developments in operations which allows it to make new and innovative
products.
The operations department must give information to the marketing department on what is being produced before it can be
marketed.

Types of market
Crumpler originally produced messenger bags in the mass market.
Crumpler has begun market segmentation (demographic) to produce other type of bags such as camera and laptop bags.
The ranges of bags are targeted at 1835-year-olds, through the use of giving their bags names, e.g. The seedy One, The old
Banger.

Competition
Crumpler has competitors in their different ranges of bags, e.g. camera and luggage bags.
They have been able to combat competition through superior design and quality, giving them a competitive advantage over the
competitors. For example Crumplers high quality and design in the bags allow them to continually keep and expand their
customer base.
Crumplers success has meant that copycat and counterfeit goods are beginning to appear. Crumpler is setting up special
arrangements with customs offices around the world that monitor ports for counterfeit goods.


Sales outlets and pricing
Crumplers products are exclusive to their stores, so they can set their own pricing.
In America, there are many dealer networks. Crumpler has set an manufacturers suggested retail price in their contracts to which retailers
agree to stick to the price allowing them to maintain prices.

Marketing strategies
Crumplers marketing strategies are informal and because their approach to business to have fun and laugh
Crumpler has always been known for its innovative, individual approach to marketing, leading to consumer perception of unique
and well-made bags made by a company that doesnt take itself too seriously.

Early days- guerrilla marketing
In the early days, they would driving around and stencilling their logo on any surface. This generated much mouth to mouth
publicity, it was cheap and adventurous.

Demographic targeting
Crumpler targets their products at the 1835-year-olds who enjoy the casual and mocking approach.
They have advertised via street magazines and free music magazines. They reach students via sponsoring university and college
events, parties and competitions and magazines. Their logo was shown at the Melbourne Fringe Festival guide.
They made a 60 second cinema ad that ran in an art house in Melbourne.
Other methods of advertising include:
o short videos on YouTube
o paying apple growers to put the Crumpler logo on the stickers
o sponsorship of the SBS program Rockwiz
o sponsorship of a nude footrace

Beer for bags
Each year, across all of its markets (excluding Adelaide and Brisbane), Crumpler encourages its customers to pay for their products
through beer.
This creates controversy on television shows which brings world-wide publicity in Australia and overseas.

Trade shows
In 2005 Crumpler decided to exhibit at the 2005 International Consumer Electronics Show the largest electronic and technology
show in the USA. It costed 30,000 dollars.
They hired a University of Melbourne architecture student to design a low-tech environment consisting of 55-gallon oil drums and
plywood walls and floors painted with green chalkboard paint. There was lots of space for people to write on the walls, it was
interactive.
It was so impressive that Crumpler signed 3 companies for projects.

Ethical influences on marketing
the beer for bags campaign is encouraging the illegal trade of alcohol and promotes drinking amongst the 1835 demographic.
They were not promoting drinking among their customers: were taking beer off the streets and giving you the bags. In Brisbane
and Adelaide, police closed down the sale, arguing that Crumpler were in breach of liquor licensing laws.

Market research
Stuart Crumpler bag designer and co-founder working as a bicycle courier designed the bag for his own use. Other couriers saw it
and started using the bags. He received feedback on what did and didnt work.
Today, the development of Crumpler bags is often determined in-house through its team of designers, who are encouraged by
management to bring ideas on board.
Consumer input into the process is encouraged through forms available online and in-store.

Consumer laws
Crumplers warranty service is testament to the quality of their products. The business believes that their warranty should reflect
the quality of the product and customer confidence in the product.
If the crumpler bags fail while they are in the bags owner, it will be replaced or repaired.




Topic 3- finance
Role of financial management
Strategic role of financial management
Roper and Miller had identified a niche in the communications market that was not being addressed by existing businesses in this
market.
They had not undertaken enough research or planning to establish its viability.
The new business offered mail delivery for 35 cents, which cut 3 cents off the price of Australia Post deliveries. Mail sorting was
completed in the back of Millers car, a Mazda 808 wagon.
Using only internal sources of finance, Roper and Miller reinvested surplus funds and expanded their business by moving to a
small shared office.
This minimised expenses by subletting floor space and sharing one premises with other small businesses. This was taken on a
month to- month basis, making the arrangement very flexible and requiring only a months notice to move out of this office.

Influence of government
Unfortunately, this business breached the Australia Postal Corporation Act 1989 (Cth) amended 1995, which protected Australia
Post from competition (this was a government-established monopoly) and City Mail was forced to close its present style
operations.

They could only legally compete with Australia Post if their delivery charge was a least 10 times the cost of a standard letter, so
they changed the operations to parcels and a courier service. They also changed the legal structure to a private company which
gave them protection.

Objectives of financial management
Growth
Miller and Roper distinguished themselves from other businesses by wearing pink lycra outfits and used bicycles. Within a year
they had grown to a full-time staff of 40 couriers.
The goal was to be able to provide employees with a suitable wage and to cover business expenses.

Profitability
Operations expanded to include Sydney, with an annual turnover of 3 million.

Liquidity
The courier business provided monthly invoices to their clients and paid wages to their employees each week.
With a monthly invoice they had a poor control over accounts receivable and clients took 60 days to pay. This meant it took them
2 months to pay their accounts. This presented a huge a problem as they were not able to gain a loan.

The processes of financial management- planning and implementing
Financial controls
Roper and Miller started a new courier service called Minuteman Messengers with an partner who managed the accounting and
administration through an initial bank loan of $30 000. This resulted in a greater understanding of the amount of cash available for
expenses and a more solid basis for determining the timing of cash inflow.
This was the only debt finance secured by them.



Financial management strategies
Working capital management, liquidity
The initial loan allowed them a buffer(shield) between payment of wages and the receipt of funds from the payment of accounts
by clients.
Slow paying accounts were quickly followed up.
There was no stock or inventory as the service was performed daily.

Profitability management
Cost controls
Fixed expenses such as the payments for office space and uniform costs were limited.
The couriers provided their own bicycles. Wages depended on the hours.
Crumpler attempted to increase efficiency of the bag itself.

Expense minimisation
Costs were kept to a minimum, the bags were made in their parents garage.
The Minutemen Messenger couriers were used to test the bags and each new batch incorporated the couriers suggestions for
improvement.
In 1995, when Crumpler registered it as a private company, under the name of Crumpler Proprietar Limited, demand increased.
Their operation moved to a small factory in Victoria where they sold bags to people who ventured in off the street and small
bicycle shops. With the sales, they bought better equipment and improved materials.

Global financial management
In 1998, they took the bags to a trade centre in Germany and were given orders. Consequently, they began selling the bags in
batches to outdoor, street wear, bicycle shops.
Roper and Miller sold Minutemen Messengers. The money was used as startup capital. This was well timed as email was just
introduced.

Cost controls
6 staff was working at the factory with some work outsourced.
To increase efficiency and to be cost effective, the manufacturing section was moved offshore to Vietnam. This allowed the
Crumpler team to use their skills and expertise in design, marketing and sales. Crumpler consequently had an arrangement with
the Vietnam factory, where crumpler puts in five major orders per year.
The Ballarat factory had financial troubles so it was closed down.

Growth- vertical integration
Crumpler went through forward vertical integration and starting setting up their own retail stores. This controlled the distribution
of their products.
They went global and opened stores in New York, Singapore, Brisbane, Adelaide and Kuala Lumpur.
Later on they entered a joint venture with a standing distributor to set up stores in asia.

Private equity
2 German investors, joined the private company on an equal share basis. They both then combined and expanded to become the
European distributors.
Crumpler supplied the design, brand and marketing skills while the germans supplied the distribution, sales and manufacturing.

Growth strategy
In 2005, crumpler exhibited at the International Consumer Electronics show with $56 500 to introduce major US retailers of
electronic equipment to its products.
They eventually signed 3 companies for $1.2 million in revenue.
The trade show also allowed them to meet retailers, agents, importers and distributors.

Methods of international payment
Payments in advance are used by Crumpler for international suppliers. Thus their financial manager can negotiate deals that
benefit Crumplers financial position.
Crumplers sales, purchasing of materials and in USD.
Payments are made by wire transfers (online) from their bank accounts to Crumplers.

Record systems
Crumpler has hired the business Reactive to design an online system that will be able to be used for sales processing and
inventory management for a dozen different regional offices. This integrated payment systems to inventory systems in several
languages.
This made record keeping much more efficient and fast.

Conclusion
The majority of business activity is financed directly from cash flow
Thorough and continuing market research enables Crumpler to be aware of all competitors, relevant suppliers and market prices.
Each department has regular meetings and constant reviews of design, cost controls
Specialist staff are employed in design, retail and marketing. They focus on the product improvements, development of new
products and plans for new stores.

Topic 4- Human resources
The strategic role of human resources
Crumpler a small business with 20 full-time employees, around 45 casual sales and a warehouse. Human resource management is
conducted by senior management within the business. The company/business is not large enough for a human resource
department.

Management
Recruitment, training and development and separation of staff is the responsibility of Crumplers General Manager and Will Miller,
Dave Roper.
They liaise with each other regarding the human resource needs of the business.

Position design
Crumpler management conceives and design positions to fill within the business based on its developing needs.
Change in trends brings a demand for new skilled staff, while marketing and retail staff are hired to meet market demand.

Outsourcing
Crumpler bags are manufactured in China.
It is the responsibility of these foreign contractors to deal with their own human resource issues.

Key influences
Stakeholders
Crumpler is a member of the Australian Retailers Association. The ARA provides members with a number of services, such as
business consulting, policy development, advocacy to government bodies.
Crumpler agrees to make honest and accurate environmental claims in its advertising and marketing, follow the ARAs Code of Fair
Trading when dealing with customers.
Complying with these policies allows Crumpler to remain stakeholders in the ARA and benefit from its services.

Economic influences
Due to the global economic slowdown, they have heavily into resources at their headquarters and employed additional staff.
It will pay handsome dividends into the future as we concentrate on developing new products and opening stores.

Technological influences
Crumpler does not employ workers for manufacturing so improvements in manufacturing technology have minimal impact on
staffing or the business workload.
Their staff benefit from technological advances, which can improve the productivity, efficiency and effectiveness. E.g. Improved
computer designs through improved computer software.

Processes of human resource management
Acquisition
Acquisition for Crumpler occurs through the traditional means of print media recruitment and, more recently, the use of online
position advertising.
Senior management shortlist and interview all full time staff. Casual retail staff are recruited by the national retail manager.


Training and development
Crumpler has no formal training program in place.
Staff are encouraged to seek training relevant to their day-to-day roles.

Maintenance
Each staff member is valued at Crumpler.
Flexible working conditions are in place so that every employee has the chance to adjust their hours and conditions to their needs.
All full-time staff are entitled to bonus payments, subject to performance results.
Full-time and casual staff come together each year for a national Christmas party, as well as smaller events and get-togethers in
individual stores and offices.

Separation
The business has disgruntled or unhappy employees.
Casual staff members most often leave to pursue other opportunities.

Strategies in human resource management
Leadership style
The participative approach to leadership is utilized.
The employees are encouraged to contribute their ideas and thoughts and take creative ownership of the business, the emphasis
is on letting employees do their job with minimal interference.

Disputes
Workplace disputes are rare at Crumpler due to the positive working environment.
Disputes are settled within the company, rather than through external arbitration, through largely informal discussion with senior
management, who seek to address all issues as soon as possible without resulting in more tensions.
the close working environment makes it clear as to whether disputes are settled and staff are satisfied.