In the chapter, we described agility as an enduring trend in operation and supply chain management. In your opinion, how did LeapFrog and Capable Toys demonstrate agility in responding to the new market demands?

18 PART CREATING VALUE THROUGH OPERATIONS THROUGH OPERATIONS AND SUPPLY CHAINS the weekend a lot, LeapFrog's CASE STUDY Supply Chain Challenges at LeapFrog introductory weekend, LeapFrog knew ab sales figures. While 360 units might not seem like a lot forecasting models indicated that if the trend day demand for Leap Pads would be approximat more than double what LeapFrog had requested by Capable Toys. LeapFrog and its manufactur supply chain partners would have to find a w another 350,000 Leap Pads and move them to retail s within a few months. the trend continued, bolj approximately 700,000 og had requested be produced ave to find a way to produce them to retail stores, all 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 impossible, to do. Few cases illustrate this better than the situa- tion faced by LeapFrog in August 2003.11.12 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 pPad. The distinguishing feature of the LeapPad, 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, giving supply chain partners little time to react. Furthermore, toy companies planning for holi- day sales have traditionally had to place orders many months 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, toy companies had one chance to get it right. If a toy company ordered too few copies of a particular toy in February or March, customers in November and Decem- ber went away disappointed, and the toy company lost signifi- cant revenues; if a toy company ordered too many, the result was leftover toys that had to be sold at a steep discount or loss. By 2003, however, LeapFrog had developed a new approach that used sophisticated forecasting systems, fast information flows and cooperation between supply chain part- ners, and a flexible manufacturing base to improve the respon- siveness of the toy supply chain. Here's how it happened. Supply Chain Constraints Within days of developing the revamped demand for LeapFrog started to work with Capable Toys to identify steps would need to be taken to increase production They found that several constraints had to be resolved: Production molding constraints. To manufacture the required plastic parts used in the LeapPad, Capable Tours had designed and built two sets of mold tools capable of producing the equivalent of 3,500 LeapPads each day. If these mold tools were run for 60 days, they could produce only 3,500 X 60=210,000 additional units-far short of the quantity needed. Material constraints. Capable Toys and LeapFrog faced a limited supply of key components, including custom- designed electronics and Tyvek, a special water-li... drool-) proof 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, toys produced in China trav eled by ship. Although this option was relatively slow, it kept down costs. But with production creeping into Sep- tember and October, LeapFrog had to consider the improved on the more expensive, options. How did LeapFrog and its supply chain partners resol these constraints? First, Capable Toys put its in-house eng neers to work designing two additional mold sets. The mold set, which went online in October and improved design of the earlier two sets, allowed Capable Toys to in its production of LeapPads from 3,500 to 6,300 units pe an 80% increase. At the same time, Capable Toys called on its first- pliers to help identify additional sources for the sp chips, membranes, and other electronics used in the Finding a source for the Tyvek paper was a little bit gain access to this key material, LeapFrog had to 300 units per day E-commerce, Relationship Management, and Forecasting The first inkling that the Little Touch LeapPad was a hit 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 might have hesitated to share such detailed sales information with a toy company. By 2003, however, retailers realized that sharing sales information in real time with LeapFrog would increase the toy company's odds of meeting surging market demand. The result was that by the Monday following the a U.S.company for the printing. Whil r the specialized in the LeapPads a little bit trickier: 10 ad to contract with d to the prod was a better alter ating retailers and costs, LeapFrog management felt this was a an running out of units and alienating relo their customers. resolved, LeapFrog had one final problem h the production capacity and material material constraints problem-getting the in CHAPTER 1. INTRODUCTION TO OPERATIONS AND SUPPLY CHAIN MANAGEMENT 19 in the stores in time for the holiday season. Because of the short lead time, LeapFrog was forced to use air shipping and special fast shipping, which added $10 to $15 to the cost of each LeapPad. These additional costs ate into the profit of the LeapPad, which sold for $35, but as with the Tyvek paper, Leap- Frog management felt that the long-term satisfaction of retail- ers and customers outweighed the additional costs. In the end, the decisions LeapFrog made to respond to the surging demand for LeapPads turned out to be the right one. While LeapFrog struggled financially in recent years, in 2013 the company made $84 million on sales of $553 million. And the company has used its success with the LeapPad product line (discontinued in 2008) to launch a wider range of educational toys that incorporate even more sophisticated electronics. 2. What data ultimately led to LeapFrog's decision to 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 material sourcing challenges LeapFrog and Capable Toys faced? How did they resolve these problems? 5. What type of logistics solutions did LeapFrog use to get 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? In the chapter, we 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 ne retailers, Capable Toys, and suppliers of key materials (1.e., Tyvek). Which supply chain partners are upstream of LeapFrog? Which are downstream? Which partners are first-tier suppliers? Second-tier suppliers