Case brief and overview:
Sher-Wood (formerly Sherwood-Drolet) has been a well-known Canadian hockey equipment manufacturer since 1949 (Zhang & Beamish, 2011, p. 23), predominantly specialising in wooden sticks for players from the National Hockey League down to players at the junior level. Sher-Wood also produces composite sticks, albeit at a much lower volume.
Whilst hockey stick production has traditionally been based in North America, over the last decade there has been a significant shift towards global sourcing in the industry (Zhang & Beamish, 2011, p.21). This has been driven by a desire to access low-cost factors of production, secure cheaper material resources, and ultimately gain a competitive advantage.
Sher-Wood’s…show more content… 19) This is expected to further hurt Sher-Wood’s stick sales.
Another major problem is that Sher-Wood’s high-end composite sticks are not achieving high margins for retailers in comparison to its competitors. This is a significant issue because retailers are instrumental in getting the final product to consumers by way of product placement in stores and marketing campaigns (Zhang & Beamish, 2011, p. 24). An assumption for these low margins is that Sher-Wood’s competitors are outsourcing production of their high-end composite sticks to low-cost labour countries such as China and Mexico.
Despite the fact that Sher-Wood outsourced production of its custom-made sticks to China, there have also been problems with the supply chain. At first production was inefficient and took several weeks. Then production was efficient but shipping was not cost effective (Zhang & Beamish, 2011, p.25).
Recommendation:
The recommendation is for Sher-Wood to move the manufacturing of its remaining high-end composite sticks to their suppliers in China. Despite subtle rises in labour costs, material costs and currency exchange rate, the overall cost of manufacturing in China is still lower than the cost in Canada. Specifically, “It is estimated that cost reduction was 0 to 15 per cent per unit depending on the model, with good quality and fast turnaround time.” (Zhang & Beamish, 2011, p. 25) Since retail margins were a concern, such a reduction in cost would enable
