A fashion company decides to market denim jeans in unusual colors: lightning green, electric orange and shocking red. The company buys denim and dyes it in each of the three colors. The next step is producing the jeans - which involves cutting, sewing, etc. - in each of the three colors. In year 1, the company expected demand for each product to be approximately the same, and produced 100,000 units of each product. However, the electric orange jeans were a runaway success (demand was 250,000), while the other two colors sold only 25,000 units each. It is unclear which color will catch on next year, and the company wants to avoid facing the same problem. As a result they decide to reverse their operations, producing basic white denim jeans first, and then dyeing them in different colors. Assume that sufficient capacity exists in both operations, and the dyeing operation is a very simple and quick process. What specific advantages might the company derive from new "operations reversal" process? Does it help the company deal with the problem they faced last year?

Question

Quizplus · Accepted Answer

The Answer is Since the dyeing operation is simple and quick, the company can delay this step till better information is available - and still respond quickly to customer demand. In the current setup, the more complex and long operation (jean production) takes place after jeans have already been dyed in different colors, so it is harder to respond to demand fluctuations quickly. Thus, the company would have had to stock large amounts of inventory of each product (different colors) in order to protect itself from demand uncertainty. The "operations reversal" essentially delays differentiation of the product and improves the company's ability to respond fast to customer demand, and allows the company to pool their inventory (one basic type of jeans rather than multiple colors).

A Fashion Company Decides to Market Denim Jeans in Unusual