Huluwa Technology Co., Ltd.: The Children’s Smart Watch

Huluwa Technology Co. Ltd. (Huluwa) was a small manufacturer of children’s smart watches in China. The company’s smart watches could be monitored by parents in real time through an application installed on their phones. The product design, application development, raw material procurement, and cloud service were all operated by Huluwa, while production was outsourced to a factory. Huluwa mainly relied on its offline channels to sell products. In April 2016, looking back at the first-quarter data for the year, the company’s operations director noted that Huluwa had sold and delivered 150,000 units to its distributors while it had produced 200,000 units. Puzzled by that gap, he was also worried about the production capacity stretch imposed on the contract manufacturer. How could the company manage continuing growth for the product?