Supply Chain Design at Crayola
Length:
07:33
Subject:
Supply Chain Design at Crayola
Textbook Reference:
Chapter 12: Supply Chain Design, page 520
Summary
This video case discusses the supply chain design issues Crayola faces in the global market.
Crayola is planning to expand into global markets, especially Asia, to lower their reliance on the
North American sales. The main challenge presented in the case revolves around balancing the
customer service levels and responsiveness with the total cost of ownership. Currently, the
components of the product discussed in the video, Washable Deluxe Painting Kit, are sourced from
various locations in the U. S. and the Far East, and the kit is assembled in the U.S. However, much
of the end product production is shipped to Asia. Crayola is wondering whether they should change
the location of the manufacturing plant to the Asian region.
Key Concepts related to the chapter
Students should be able to understand the supply chain design issues that Crayola is facing. Based
on the supply chain design option categories, any given piece of information can be classified into
strategic options, logistical network options, integration options, and sustainability options.
At Crayola, the primary factor that drives supply chain design decisions is capability issues. Every
supplier selection decision should ensure that Crayola could meet the demand by having the
appropriate level of capacity and lead-time. This issue would fall in the domain of integration
options, which focus on creating designs that can mitigate supply chain dynamics and risk,
fostering supply chain collaboration such that major processes are linked together, and supplier
selection. For further discussion and information, students may refer to chapter 14 “Supply chain
integration.”
orchestrating the optimal flow path of materials. Some components are currently made
domestically; while others are sourced in Asia, which in turn raises the question —why not produce
in Asia? There are conflicting concerns regarding duties and tax cost, labor cost, and intellectual
property protection. This decision is not an easy one, because production may sometimes occur at
distances that are remote from the target market, and Crayola also has to maintain responsiveness
and flexibility to a certain extent.
Essay or Discussion Questions Based on Video
1. Describe the text’s four external and internal pressures on supply chain design as they
relate to Crayola’s supply chains for ColorWonder® and Washable Deluxe Painting
Kit®.
• The four external and internal pressures include dynamic sales volumes, customer
service and quality expectations, service and quality proliferation, and emerging market
characteristics. For both products, dynamic sales volumes create a challenge for
Crayola because of the strong seasonality of sales. When a new product is launched,
accurate forecasts become even more difficult for Crayola. Due to the fact that Crayola
maintains business with a number of large-scale retailers such as Walmart, it is
important for Crayola to meet the service and quality expectations of these important
2. Review the strategic implications of supply chains as described in the text. Does Crayola
have efficient or responsive supply chains, or both? Explain your position.
• The industry and product characteristics show that for Crayola, their functional
products must be matched with efficient supply chains. However, case details indicate
that Crayola is utilizing a hybrid form, which incorporates responsiveness as well in
their supply chain. This decision is well stated at the end of the video, where it says,
“Supply chain design decisions clearly aren’t black and white.”
• The design features should be considered in choosing between efficient supply chains
and responsive supply chains. Products from Crayola can be described as make–to–
3. Regarding the design of the Washable Deluxe Painting Kit® supply chain, Crayola must
evaluate the strategy of next-shoring in Asia or retaining an existing network that
involves the assembly of the kits in the United States. Compare and contrast these two
supply chain designs from perspective of the decision factors and pitfalls for outsourcing
discussed in the text.
• Outsourcing decisions are guided by a number of decision factors including
comparative labor costs, rework and product returns, logistics costs, tariff and taxes,
market effects, labor laws and unions, internet access, energy costs, access to low cost
capital, and supply chain complexity. The outsourcing option, in which Crayola decides
to locate their production facilities offshore, would result in benefits of reduced labor,
logistics, tariff, and tax costs. Some unquantifiable, but substantive benefits include
positive market effects and reduced supply chain complexity.