Holey Soles experienced rapid revenue growth. During this period, Holey significantly increased the production capacity, warehouse space and inventory in an effort to meet demand. Now Holey has excess manufacturing capacity beyond the actual manufacturing plan, this works extremely well when actual demand exceeds forecasted demand (pre-booked orders), but is it robust enough to handle the opposite scenario? In other words, the model is “optimized” for large upswings in product demand, thus allowing the company to manufacture products within a selling season, but is “sub-optimized” for large downswings in product demand, which is what happened between November and January and what will happen if the economy tanks. The challenge is building a supply chain that is robust enough to withstand a broad range of scenarios, and having enough forward visibility to economic changes and supply chain activities so that the company can take preemptive corrective actions. Holey Soles doesn’t have real-time visibility to actual demand and downstream inventory. From the case it looks like the company’s primary “demand signal” is not actual demand, but orders from retail customers. Diversify?
Holey Soles makes the bulk of its sales in the summer, it makes sense to consider diversification. By extending the portfolio of products they can ensure a regular revenue stream from January through to December. Innovation is the key to creating a unique brand identity and distinguishing Holey Soles from other foam-clog suppliers. As a fast-growing company needs to be careful they don’t try and branch out too quickly from what they do well but being too conservative could also stunt their growth prospects. Growing international sales is the way to go for Holey. They need to spend more time looking for new opportunities in new markets. One of the keys to building a strong business is balancing current sales with future, possibly much larger sales. This means being realistic about...
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