Case Study: Supply Chain at LeapFrog
In today’s global economy, competition on innovative products and the increased customer expectations on product quality have forced businesses to focus more on the supply chain. A supply chain consists of a network (sometimes referred to as a logistics network) that links companies by physical, information and monetary flows.
Question 1
Figure 1: LeapFrog Supply Map
A supply chain map (either geographical or abstract) is a graphical representation of the supply network. Figure 1 above shows abstract map of LeapFrog’s supply chain by highlighting the first and second-tier suppliers and up and down stream partners. The suppliers of raw materials are first-tier suppliers, and thus are upstream partners. Second-tier supplier (Capable Toys) is a downstream partner as it assembles a complete product. Similarly, the retailers and customers (consumers) are downstream partners.
Question 2
Introduced in the first week of August 2013, LeapFrog’s LeapPad toys sold 360 units as reported by Toys “R” Us and Target. This was an unusual sales record and the retailers shared the information with LeapFrog. However, this was against the normal market trends of information and data sharing. Consequently, the information was well received by LeapFrog on the first day after the weekend and after running it through its forecasting models ascertained that the demand was genuine. However, this increase in demand was projected to be double the earlier requested number – 700,000 units as opposed to the requested of 350,000 units. Within days, LeapFrog contacted Capable Toys to make arrangement for the extra units.
Question 3
There were three challenges that had to be resolved before a new order could be effected. They include limited number and capacity of molds, limited supply of raw materials and the added number of staff required because of the increased production. Production molds posed the greatest constraint to the production process. This is because Capable Toys had two sets of molds (tools) that could produce an equivalent of 3,500 LeapPads each day, and thus, within 60 days, the tools will only produce 210,000 units. To solve this challenge, Capable Toys engaged its in-house engineers to design an additional two units, with a third one going online in October. This increased the production by 80% by producing 6,300 units each day. Furthermore, Capable Toys contacted its first-tier suppliers to increase the production of other custom-made components while LeapFrog engaged a U.S. company to print Tyvek paper.
Question 4
Solving the production challenge was not easy for LeapFrog and Capable Toys as they had a supply constraint of constituent materials. They include custom-made electronics (chips, membranes and other electronics) and Tyvek paper. Nevertheless, this challenge was solved as Capable Toys contacted its first line of suppliers for additional key components and LeapFrog made contact with a U.S. company to produce Tyvek paper.
Question 5
Traditionally, LeapFrog could have used sea transport to get the products from China to the U.S. However, these toys would not have made it on time for the holiday season thus forcing LeapFrog to use air transport. This is a fast, convenient and more secure mode of transport. However, the cargo involved (toys) is bulky and therefore costly to be transported by air (increased the unit cost by $10 to $15), thereby eating into LeapFrog’s profits. The alternative was to engage the traditional mode of transport (sea transport) for such cargo. This is because of the reduced transportation costs involved and the effectiveness of carrying bulky cargo. Also, sea transport is environmentally friendly. Conversely, sea transport is slow. Due to the urgency LeapFrog had to ensure on time deliveries, air transport was deemed the viable option. However, had it been in August – a slower month in terms of sales – LeapFrog could have used sea transport as it takes 14 days from China to the U.S., thus saving on transport cost.