Crayola, LLC, is a profitable, wholly owned subsidiary of Hallmark Cards of Kansas City, Missouri. The company's world headquarters are located in Easton, Pennsylvania; departments there include house marketing, sales, operations and manufacturing, finance, R&D, Internet services, customer care consumer affairs, and corporate communications. Sales offices in Easton, Bentonville (Arkansas), and Minneapolis manage domestic accounts, while offices in Canada, Mexico, France, Italy, Japan, and Hong Kong handle international business. The Global Operations Division in Easton is responsible for the sourcing, quality, manufacturing, and logistics of Crayola products worldwide.
Two-thirds of what Crayola sells globally is produced in its three Pennsylvania facilities in the Lehigh Valley. The "Forks I" plant is devoted to manufacturing crayons and markers, the "Forks II" plant handles plastic molding, and the Lehigh Valley Industrial Park (LVIP) plant creates paints, modeling compounds, activity kits, and Silly Putty®.
A single 800,000-square-foot distribution center in nearby Bethlehem, Pennsylvania, handles finished goods for logistics to U.S. and international customers, and to global business units.
Each plant and its products have a unique supply chain because the raw materials, suppliers, and requirements all differ. For example, paraffin wax for crayons comes from sources in Louisiana and Pennsylvania via rail tanker cars twice a week, so proximity to the railroad is essential for the Forks I plant making crayons. All raw materials for each supply chain are first evaluated by independent board-certified toxicologists so Crayola can ensure its products are not only of the highest quality but also safe and nontoxic. Then, design hazard and risk assessments are done for all products during development to ensure production meets the stringent standards set by the Art and Creative Materials Institute (ACMI).
Pete Ruggiero, executive vice president-global operations, and his team have responsibility for designing supply chains that are innovative, resilient, responsive, and sustainable while ensuring quality, ethics, and cost considerations are met. Whenever the company's marketing division develops a new product kit that might contain paints, clays, crayons, markers, or other products, the supply chain sourcing of the raw materials as well as the downstream production processes must be addressed to be sure the forecasted demand can be accommodated within the existing facilities.
Not long ago, the company introduced an innovative product called Color Wonder® that consists of pens that only write on the special paper they are packed with for sale. This required examining whether the existing supply chain could support the addition of producing the specialized ink markers, where to source the coated paper, and how to best create the kits containing both markers and paper.
Now in production, Color Wonder® is a bestseller worldwide, with nearly 40 percent of Japanese sales coming from this product alone. Managers received feedback from the market that the pens in the kits were lasting longer than the paper, so the supply chain responded by creating separate paper packets so consumers may purchase just the paper after the initial pages in the kit are used. The result of this action has had a ripple effect on the demand for markers, which is now lower, since consumers are buying fewer full kits but more Color Wonder® books, so the supply chain and production had to adjust once again.
Another major challenge is the assembly of kits whose components are derived from diverse supply chains and assembled into finished products in the company's LVIP plant. An example is the popular Washable Deluxe Painting Kit®. The kit consists of paints and watercolors, paintbrushes, smocks for the artist, and sponges for special effects. The company wants to expand sales into the growing Asian market. The kit's paints and watercolors are made by Crayola in the United States, but the paintbrushes and sponges come from China and the smocks come from Vietnam. Labor costs for assembling the kits in the United States is a significant component, so if Crayola wants to sell the kits internationally, it needs to explore whether it makes sense to keep the existing supply chain design in place, or make a change to begin producing the kits closer to the growth in its international customer base. The lynchpin of this decision is that all components (including paint and watercolor trays historically manufactured in the United States)

need to be made in Asia to make production efficient, and minimize duties and lead times. By producing the entire product-including its components and packaging-in Asia, Crayola is able to optimize its delivered cost to the markets. Producing this product in the United States and shipping it to Asia would be an impediment because of cost and lead time challenges.

QUESTIONS

1. Describe the text's four external and internal pressures on supply chain design as they relate to Crayola's supply chains for Color Wonder® and the Washable Deluxe Painting Kit®.

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.

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 the perspective of the decision factors and pitfalls for outsourcing discussed in the text.

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Crayola, Washable Deluxe Painting Kit Craylis Cray 3 EA 8 FL 02. (236 ml) BOTTLES OF PAINT-ART SMOCK 16 WATERCOLOR PAINTS-4 BRUSHES-5 SPONGES 5+ creyes The Washable Deluxe Painting Kit®, assembled at Crayola's Lehigh Valley Industrial Park plant, contains paints and watercolors produced in the United States and paint brushes, a smock, and a sponge produced in Asia. Demand for the kit has grown substantially in international markets, prompting a redesign of the supply chain so that Asian demand can be satisfied by Asian production facilities capable of producing and assembling the entire kit.