Merriwell Bag CompanyMerriwell Bag Company is a small, family-owned corporation located in Seattle, Washington.’ The stock of the company is equally divided among five members of the Merriwell family (husband, wife, and three sons), but the acknowledged leader is the founder and patriarch, Ed Merriwell. Ed Merriwell formed the company 20 years ago when he re-signed-as a mill supervisor for a large paper manu-facturer. Ironically, the same manufacturer formed a container division five years ago and is presently one of Merriwell’s competitors.COMPANY STRATEGY The family attributes the success of Merriwell Bag Company to the fact that it has found a market niche and has no “serious” competition. Merriwell supplies stock bags to many small chain stores scattered over a wide geographical area. It ships the bags directly to small regional warehouses or drop ships directly to the individual stores. The family reasons that the large bag manufacturers cannot profitably provide service to accounts on that small of a scale. In fact, Ed Merriwell formed the business with one secondhand bagging ma-chine to provide bags for a small discount store chain and a regional chain of drug stores. These two organizations have grown tremendously over the years, and Ed Merriwell proudly points out that the bag company has grown with them. Today, these two original clients are Merriwell’s largest customers. The Merriwell family does not want its business to be too heavily reliant on any one customer. Hence, they have a policy that no single customer can account for over 15 percent of sales. In fact, Merriwell Bag Company encourages its major cus-‘Reprinted with permission of Charles E. Merrill Publishing Company.tomers to establish alternative sources of bag sup-ply for insurance against stockouts because of paper shortages, freight line difficulties, local trucking/warehousing strikes, and production problems that may locally affect Merriwell’s ability to supply bags. Merriwell does not aggressively pursue new bag customers, yet it has over 500 customers. The smallest customers order five bales per year (small-est order processed and shipped), and the largest order 15,000 bales per year. The number of bags per bale varies according to the weight of paper Used and the size of the bag. Merriwell manufac-tures only pinch-bottom general merchandise bags, ranging in size from small 21/2″ x 10″ pencil bags to large 20″ x 2″ x 30″ bags used for larger items sold in discount stores. They make no flat bottom (grocery) bags or bags that require sophisti-cated printing (specialty bags). Bag labels are re-stricted to 20 percent face coverage and one-ink color placed on one side only. Hence, Merriwell’s central strategy is built around low unit cost pro-duction due to standardization which allows a selling price that is competitive with the large bag manufacturers. At the same time, Merriwe11 pro-vides the shipping and inventory services that are on too small of a scale for most of the large manufacturers. The Merriwell family takes great pride in “taking care of” a customer who has an emergency need for additional bags or who would like Merriwell to warehouse a bag order for a given time because of storage problems at the customer’s warehouse.FORECASTING DEMAND Providing this personal service requires tight, in-ventory control and production scheduling at Merriwell’s bag plant. A highly accurate demand forecast allows Merriwell to service the special
