True or False?

Patagonia got started by

making outdoor jackets for
mountaineering

True or False?

The Patagonia mountains

reside on the border of
Argentina and Chile

True or False?

Patagonia cares more about

saving the environment than
making a profit

Chapter 18
Managing Service and
Manufacturing Operations
By Katie Presnell, Alex Legarza, Adam Lumpkins, Sanam
Alavizadeh

About Patagonia

Known for high-end outdoor gear

1300 employees
Highly encourage employees to
spend time out of office
$540 million annual revenue for
2013
39 stores in 7 countries
More concerned with being
environmentally friendly than
making a profit

Build the best product, cause no

unnecessary harm, use business to
inspire and implement solutions to
the environmental crisis.
-Patagonias Mission Statement

Timeline
1965: Original company founder Yvon Chouinard started partnership with Tom Forst named Chouinard
Equipment
1970: Became the largest supplier of climbing hardware in America
1972: Changed company name to Patagonia Inc.
1980s: Introduced vibrant colors and prints into their clothing line
1981: One of the first companies to provide on-site child care
1985: Developed two new fabrics, Capilene and Synchilla, that revolutionized outdoor gear
1986: Made the oath to donate 10% of profits or 1% of sales (whichever is greater) to over 1,000 small
environmental organizations
1991: Sales suffered due to recession, had to lay off 20% of the company
1993: Created Patagonia Employee Internship Program
1996: Opened first (and only) distribution center in Reno, Nevada
1996: Vowed to only use organic cotton for all their products
1998: Started their first national environmental campaign and have done it every year since
2005: Launched the Common Threads Recycling Program
2006: Won award for Environmental Sustainability by Business Ethics
2008: Won award for EcoBrand of the Year at the Volvo EcoDesign Forum
2010: Won award for Gear of the Year by National Geographic
2012: Won a lifetime achievement award for Leading Sustainable Business by The Sustainable Business
Council

Competitors

Strengths

High-quality outdoor clothing and equipment

Low employee turnover
Environmentally friendly business
First company to base products out of recycled fleece made soda bottles
Targets environmentalists, outdoor activities and quality driven consumers
Excelled in promoting products by word-of-mouth
Offers on-site corporate childcare
YouTube video for each product
Line of 100% recycled clothes

Weaknesses

Small number of retailers

Uses extreme images to market products
Organic cotton makes for expensive products
Care more about being environmentally friendly
than making a profit.
Small target market
Less fashionable apparel compared to
competitors

Opportunities
Renting highly specialized
equipment
Widen market share
Advertise product as both
extreme sports and everyday
wear.
Increase of online spending
Expand target market
Expand to new countries
Increase of environmental
activism

Threats
Specialty retailers have shifted to
large department stores
Competitors: North Face, REI,
Columbia Sportswear, etc.
Higher costs for growing and
handling organic raw materials
Ageing target market

Role quality plays in managing operations

Total Quality Management: Integrated, organization-wide strategy for

improving product and service quality
Customer Focus
Customer Satisfaction
Continuous Improvement
Teamwork
Quality possesses three characteristics:
Reliability
Serviceability
Durability
Ambassadors are more than just athletes
Field testers for our gear
Storytellers for our tribe
Test
Refine
Validate

Essentials of managing a service

business

Success depends on how well employees deliver

their services to customers
Internal Service Quality
Environmental and social responsibility
Healthy planet
Act responsibly
Business can inspire solutions
The most important right we have is the right to be
responsible. -Gerald Amos
Living with limited resources
e-Fibers
Employee Activism
Environmental internship programs
Salmon runs
Bike-to-Work Week

Corporate Responsibility
Promoting fair labor practices
and safe working conditions
throughout Patagonias supply
chain
Working with factories
Working with mills
FAQs

Patagonias Manufacturing Operations

Amount of processing
Make-to-stock operations
Flexibility
Batch production

Products made in:

Jordan, Nicaragua, Sri Lanka, India, Bangladesh, China, Thailand,
Vietnam, Turkey, Mexico, Costa RIca, Colombia, El Salvador, Israel,
Philippines and the U.S.

Only U.S. distribution center in Reno, NV

Productivity

the measure of performance that indicates how many inputs it takes to

produce an output.

Two ways to measure productivity

1. Partial
2. Multifactor

Which does Patagonia use?

Inventory Management

Types of Inventories
1. Raw materials
2. Component parts
3. Works-In-Progress
4.Finished goods

Inventory cost can be among

the largest a business can
incur.