Sport Obermeyer Ltd.

Harvard Business School Case #695-022

Case Software #XLS-295

Copyright © 2011 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic,
mechanical, photocopying, recording or otherwise—without the permission of Harvard Business
School.
Exhibit 6 Procurement Information for Obermeyer's Parka Components

Avg. % of
Procurement Total Parka
Component Variety Country of Origin Lead Time Minimums Usage per Parka Material Cost
Greige Shell 10 Japan, USA, 45-90 days 5,000-10,000 yards 2 .2-2.5 yards per 30%
Fabric Switzerland, adult parka
Germany, Austria, 1.5-2 yards per
Korea, Taiwan child's parka
Finishing of Shell 8-12 color-prints per Finishing takes Dyeing or Dyeing: 1,000 yards 2.25-2.5 yards per 13%
Fabric fabric place in country of Printing: 45-60 Printing: 3,000 yards adult parka
origin (see above) days per design, at least 1.5-2 yards per
1,000 yards per color in child's parka
any design
Finished Lining 6 Nylon: Korea, 45-60 days 600-1,000 yards 2-2.25 yards per 13%
Fabric Taiwan Fleece: adult parka
Korea, Taiwan, 1.25-1.75 yards per
USA child's parka
Insulation 3-4 different weights Hong Kong, Korea, 2-3 weeks 50-100 yards ~ 2 yards per adult 16%
used (from 80-240 Taiwan, China parka
grams/meter) ~ 1.2-1.5 yards per
child's parka
Zippers 400 standard tape colors Hong Kong, Japan Standard (from 500 yards (standard ~ 1 yard 12%
4 teeth gauges Hong Kong): 60 colors) 1000 yards
4-5 teeth colors days (custom colors)
2-3 teeth materials Custom (from
5-6 slider types Japan): 90+
days

Thread 80 colors Hong Kong 30 days 5,000 yards 2,000-3,000 yards 2%

Logo Patches, various Mostly from Hong 15-30 days various various 10%
Drawcords, Hang Kong
Tags, etc.
Snaps (undyed) 10 Germany, Italy, 1-2 months 1,000 pieces 5-10 pieces 3%
Hong Kong
Dyeing of Snaps 50 colors Hong Kong 15-30 days 1000 pieces per color 5-10 pieces 1%
 100%
Source: Obersport
Exhibit 7 Sample—Parka Assembly Operations for the Rococo Women's Parka

HK$/ Piece Operation

1 $0.05 Make belt loop (× 1). (Subcomponent completed by outside subcontractor)

2 $0.20 Sew front shoulder seam with invisible stitching. Quilt all over: lining (× 5),
front placket (× 1), and collar (× 2). (Subcomponent completed by outside
subcontractor)
3 $0.50 Invisible-stitch front bellow facing (× 2).
4 $0.50 Double top-stitch front bellow facing (× 2).
5 $0.70 Zig-zag stitch front bellow seam (× 2).
6 $2.40 Set double-jetted zipped pocket (× 2) and insert D-ring (× 1).
7 $0.25 Five-stitch overlock pocket bag (× 2).
8 $1.00 Invisible-stitch bottom bellow facing, sew front shoulder pleat (× 2), insert
front body facing.
9 $0.40 1/4" double stitch the front and back shoulder seam (× 4).
10 $0.30 Single top stitch (the middle of double top-stitching) the front and back
shoulder seam (× 4).
11 $4.50 Turn over the body and attach collar, sew zipper; invisible-stitch bottom
and sleeve opening,
leave a small opening at the bottom of left front zipper.
12 $1.00 1/4" double stitch the front zipper seam from bottom to collar top.
13 $0.50 Invisible stitch the back bellow seam (× 2).
14 $0.50 1/4" double stitch the back bellow seam.
15 $0.70 Zig-zag stitch back bellow seam (× 2).
16 $1.00 Join under facing of back bellow seam with invisible stitching (× 2). Join
front and back shoulder seam with invisible stitching (× 4).
17 $0.50 Close side seam with invisible stitching, match seam ends (× 6).
18 $0.25 Three-stitch overlock the side seam.
19 $1.00 Sew sleeve opening, bottom hem with invisible stitching.
20 $0.80 Invisible stitch front placket seam, then 1/4" double top-stitch the placket
seam.
21 $1.10 Invisible stitch the sleeve seam (x 4); invisible stitch sleeve panel seam,
sew pleats at sleeve panel seam (× 2).
22 $0.90 1/4" double top-stitch raglan sleeve seam and sleeve panel seam (× 6).
23 $0.70 Single lockstitch raglan sleeve seam and sleeve panel seam, double stitch
the center of sleeve panel seam (× 6).
24 $0.70 Invisible stitch the armhole seam (× 2), match the notch of armhole seam
(× 2).
25 $0.50 Double stitch armhole seam (× 2).
26 $0.40 Single lockstitch raglan sleeve seam and sleeve panel seam, double stitch
the center of sleeve panel seam (× 6).
27 $0.60 Single lockstitch to close bottom hem facing (× 1), insert the drawstring to
bottom hem.
28 $0.60 Invisible stitch sleeve opening, insert/sew elastic to sleeve opening (× 2).

29 $1.00 Sew collar facing (× 1), invisible stitch the collar top, close bottom of collar,
insert belt loop, change thread.
30 $0.25 1/4" double needle stitch at middle part of placket (× 1).
31 $0.35 Zig-zag stitch at the center of double needle stitch at placket (× 1).
32 $0.80 Running stitch to close the end of filled placket (× 1).
33 $0.20 Sew main label, and insert the label at side seam, and then sew size label.
34 $0.80 Sew the inside pocket: pocket with zipper at left, pocket with velcro at right.

35 $0.20 Set front facing with 1/16" edge stitching (× 2).

36 $1.70 3 stitch overlock lining pocket bag (× 2).
37 $1.60 Sew triangular stitching at ends of zipper facing, invisible stitch at zipper
facing seam, turn out and 1/16" edge-stitching (× 1).
38 $1.30 Sew 13 top stitching at the lining body.
39 $1.40 Five stitch overlock the lining body.
40 $0.80 Set shoulder pad (× 2).

Note: Total Average Labor Cost for the Rococo parka = $HK78. Column does not add since some operations were
performed multiple times to completely assemble one parka.
Exhibit 8 Comparison of Operations in Hong Kong and China

Topic Hong Kong China

Hourly Wage HK$30 RMB 0.91
Exchange Rate HK$7.8 = US$1 RMB (Renminbi) 5.7 = US$1
Working Hours 8 hours/day, 6 days/week 9 hours/day, 6.5 days/week
=> Total = 48 hours/week => Total = 58.5 hours/week
Maximum overtime allowed = 200 During peak production periods,
hours/year workers work 13 hours/day, 6.5
days/week
Weekly (Nonpeak) 19 parkas 12 parkas
Output/Worker
Actual labor content per parka ~2.35 hours ~3.6 hours
(including repair work)
Paid labor time per parka ~2.53 hours/parka ~4.88 hours/parka
(including repair work)
Labor Cost/Garment HK$75.6 RMB4.45
Line Configuration 10-12 people/line 40 people/line
Training Cross-trained Trained for single operation only
Minimum Order Quantity 600 units in same style 1,200 units in same style
Repair Rate 1-2% ~10%
Challenges ● Wage Rate ● Workforce:
● Workforce: ● Less quality and cleanliness
conscious
● Low unemployment (~2%) ● Training requirements
● Younger workers prefer office
jobs
Exhibit 9A Cost Information for Rococo Parka (Made in Hong Kong)

Obermeyer Landed Cost

Cost FOB Obersporta $49.90
Agent's Fee (to Obersport, 7%) $3.49
Freight (Ocean Carrier)b $1.40
Duty, Insurance, and Miscellaneous $5.29
Total Landed Cost $60.08

Cost FOB Obersport:

Material $30.00
Labor $10.00
Hong Kong Quota, Obersport Profit and Overhead $9.90
Total $49.90

All figures in US Dollars

a
FOB (free on board) Obersport means Obermeyer paid for freight and owned products while they were in transit.
b
If transportation by air, cost would be approximately $5.00 per parka.
Exhibit 9B Estimated Cost Information for Rococo Parka (if assembled in China)

Obermeyer Landed Cost

Cost FOB Obersporta $42.64
Agent's Fee (to Obersport, 7%) $2.98
Freight (Ocean Carrier)b $1.40
Duty, Insurance, and Miscellaneous $4.90
Total Landed Cost $51.92

Cost FOB Obersport:

Material $30.00
Labor $0.78
Transportation within China and China $2.00
Overhead
China Quota, Obersport Profit and Overhead $9.90
Total $42.68

All figures in US Dollars

FOB (free on board) Obersport means Obermeyer paid for freight and owned products while they
a

were in transit.
b
If transportation by air, cost would be approximately $5.00 per parka.
Exhibit 10 Sample Buying Committee Forecasts, 10 Styles of Women's Parkas

Individual Forecasts Average Standard 2 x Std.

Style Pricea Laura Carolyn Greg Wendy Tom Wally Forecast Deviation Deviation
Gail $110 900 1,000 900 1,300 800 1,200 1,017 194 388
Isis $99 800 700 1,000 1,600 950 1,200 1,042 323 646
Entice $80 1,200 1,600 1,500 1,550 950 1,350 1,358 248 496
Assault $90 2,500 1,900 2,700 2,450 2,800 2,800 2,525 340 680
Teri $123 800 900 1,000 1,100 950 1,850 1,100 381 762
Electra $173 2,500 1,900 1,900 2,800 1,800 2,000 2,150 404 807
Stephanie $133 600 900 1,000 1,100 950 2,125 1,113 524 1,048
Seduced $73 4,600 4,300 3,900 4,000 4,300 3,000 4,017 556 1,113
Anita $93 4,400 3,300 3,500 1,500 4,200 2,875 3,296 1,047 2,094
Daphne $148 1,700 3,500 2,600 2,600 2,300 1,600 2,383 697 1,394
Totals 20,000 20,000 20,000 20,000 20,000 20,000 20,000

a
Obermeyer's wholesale price

Notes
Laura Kornashiewicz was marketing director
Carolyn Gray was customer service manager
Greg Hunter was production manager
Wendy Hemphill was production coordinator
Tom Tweed was a sales representative
Wally Obermeyer was vice president