18 MARTI CREATING VALUE THROUGH OPERATIONS AND SUPPLY CHAINS CASE STUDY Supply Chain Challenges at LeapFrog Introduction A supply chain consists of a network of companies linked together by physical information, and monetary flows. When supply chain partners work together, they are able to accom plish things that an individual firm would find difficult, if not imposible, todo Few cases illustrate this better than the situa tion faced by LeapFrog in August 2003.12 Leapfrog, which describes itself as a leading designer developer and marketer of innovative technology-based edu cational products and related proprietary content had just introduced a new educational product called the Little Touch LeapPad. The distinguishing feature of the Leaplad, whose target market was toddlers, was that it combined high-tech materials and sophisticated electronics to create an interactive "book" that made appropriate sounds when a child touched certain words or pictures While LeapFrog was confident the toy would be popular, no one including the retailers, Leapfrog, and Capable Toys the Chinese manufacturer who had primary responsibility for producing the LeapPads knew for sure what actual con sumer demand would be. Such uncertainty, which is typical for the toy industry can be particularly problematic because the demand for toys is concentrated around the November and December holiday season, lving supply chain partners little time to react. Furthermore, toy con ies planning for bob day sales have traditionally had to place anders may onths in advance in February or March to allow enough time for products to work their way through the supply chain and to retailers' shelves. In effect to com e h ome has to it right. If a toy company ordered too low copies of a particular toy in February March. c omers in November and Decem ber went away disappointed, and the toy company lost signifi cant revuca o company ordered to maty, the result was leftover toys that had to be sold at a sleep discount or loss. By 2003. however leap og had developed a new approach that used sophisticated forecasting systems, fast informations and co tton between supply chain part nets, and a flexible manufacturing base to improve the respon siveness of the toy supply chain. Here's how it happened introductory weekend. LeapFrog knew about the wecken sales figures. While 360 units might not seem like a lot. LeapFrog forecasting models indicated that if the trend continued, hol day demand for LeapPads would be approximately 700.000 more than double what LeapFrog had requested be produce by Capable Toys LeapFrog and its manufacturing and logistic supply chain partners would have to find a way to produce another 350,000 LeapPads and move them to retail stores, all within a few months. Supply Chain Constraints W ithin days of developing the revamped demand forecast LeapFrog started to work with Capable Toys to identify what steps would need to be taken to increase production levels They found that several constraints had to be resolved: Production molding constraints. To manufacture the required plastic parts used in the Leap Pad Capable Toys had designed and built two sets of mold tools capable of producing the equivalent of 100 Leap Pads cach day. If these mold tools were run for 60 days, they could produce only 3.500 X 60 = 210.000 additional units-ar short of the quantity needed Material constraints. Capable Toys and LeapFrog faced a limited supply of key components, including custom designed electronics and Tovek a special water fe drool pro paper Logistics constraints. Even if capable Toys was able to produce the additional toys required Leapfrog had to consider how best to get those units from China to US retail shelves Traditionally, to produced in China eled by ship. Although this option was relatively show, kept down costs. But with production creeping Sep tember and October LeapFrog had to consider the more expensive, opcions How did Leapfrog and its supply chain partners resole these constraints? First, Capable Toys put inbouse neers to work designing two additional mold sets. The third molds which went online in October and improved on the design of the earlier two sets, allowed Capable Toys production of Leap Pads from 0 to per day an increase Al the same time. Caputile Toms called on its fine-ther sup places to help dewly als o the p red chips membranes and other electronics used in the Leap Pads s E-commerce, Relationship Management, and Forecasting The first inkling that the Little Touch Leap was a bit came in early August 2003, when major retailers such as Target and Toys"R"Us showed sales of 360 units during the intro ductory weekend in previous years, these retailers mighe have hesitated to share och detailed sales information with a n access to this key material Leap og had to contact with US for the price while thided to the prod demand. The result was that by the Monday in the Leh r ering the ma p a .pdf CHAPTER 1. INTRODUCTION TO OPERATIONS AND SUPPLY CHAIN MANAGE VD SUPPLY CHAIN MANAGEMENT 19 short kadi each Ceapad 1 Lead, which sold for $15 ing management in time for the holiday season. Because of the time. LeapFrog was forced to use air shipping and E shipping, which added $10 to $15 to the cost of Ped. These additional costs ate into the profit of the which sold for $35, but as with the Tyvek paper cap- gement felt that the long-term satisfaction of retail tweighed the additional costs. end the decisions LeapFrog made to respond to the and for Leap Pads turned out to be the right one leptog struggled financially in recent years, in 2013 made 54 million on sales of 5553 million and pany has used its success with the Leap Pad product line and in 2005 to launch a wider range of educational ws that incorporate even more sophisticated electronics 2. What date ultimately led to Leapfrogs de Increase production levels of the Little Touch LeapPads? Where did these data come from? How long after inter- preting these data did LeapFrog start talking with Capable Toys about increasing production levels was it days, weeks or months? 3. What part of the production process limited output lev- els at Capable Toys? How did Capable respond to the challenge? 4. What were some of the matcrial sourcing challenges LeapFrog and Capable Toys faced? How did they resolve these problems? . What type of logistics solutions did LeapFrogs the toys to the stores on time? What are the strengths and weaknesses of these solutions? If it had been August rather than December, what other options might Leap- Frog have used described agility as an enduring trend in operations and supply chain management. In your opinion, did Leapfrog and Capable Toys demonstrate agility in responding to the new market demands? Questions Draw a map of the supply chain for LeapFrog, including tailers Cape Toys, and suppliers of materials Tek Which supply chain partners are upstream of Which are downstream? Which partners are finster suppliers? Second-tier suppliers? REFERENCES Books and Articles Blackstone. II. ed. APICS Dinery 15th ed. (Chicago, ILE AS 2016 and Pereira. "Christmas Spree Behind Hit Toy et Tap Seasonal Sur.Wall Street Decem her 2003 Goran "Tresh ideas." Baking and Stack, December 1, 2004 Evans, LE Shulman, "Competing on Capabi The New Rules of Corporate Strategy." Harvard Bus- 70. no. 2 (March-April 1997:57-69. Internet American Society for Quality (ASQ). www.asq.org ARCS.www.apics.org Automotive Industry Action Group AIAG), www.aiag.org about Grocery Manufacturers of America (GMA). www.gmaonline org Institute for Supply Management SM www.ism.ws. SMS 2016 Mary Survey het magazine.ism.ws/wp- content/uploads/2016/12/16-23- Salary Survey May 16.pdf LeapFrognerprises, Inc. 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