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Case Study Sport Obermeyer
Case Study Sport Obermeyer
Burton Snowboards
Innovative Burton
outerwear performance meets
leading Motorola Bluetooth
technology
Sport Obermeyer
Sport Obermeyer a high end fashion skiwear designer and
merchandising company
Commitment for producing line of fashion skiwear for 1993-94
Increase profits
Obersport Ltd.
Alpine Ltd
Hong Kong
Other subcontractors
Macau
China
Lo Village
COMPANY
NETWORK:
Recently, a number of
contractual ventures
were added and a new
complex in Lo Village
Guangdong China
Product and Segmentation:
Product Variety:
Obermeyer Product
Fashion Ski Apparel
Parkas, Vests, Sweater, ski suits, shells, ski pants, turtlenecks and
accessories
Parkas : Most critical design
Products offered in five different genders (Men, Women, Boys,
Girls, Preschoolers)
Company segmented each gender market according to price,
type of skier and fashion forwardness.
U.S. Skiwear estimated sales in 1992: US$ 32.8 million
Obermeyers Share:
45% of children skiwear mkt.
11% of adult skiwear mkt.
Delivering products by
Specialty Ski-
Retail Stores Most sales occur between
early September September and January
Sport Department
Consumers
Obermeyer Stores
Direct Mail
Retailers
Production Options
Hong Kong Mainland (Guangdong, Lo Village)
More expensive Cheaper
Smaller lot sizes Larger lot sizes
Faster Slower
More flexible Less flexible
Obersport Limited
Obersport Ltd
To coordinate production of sport obermeyers
products in Far East
Responsible for fabric and component sourcing
Forecasts
800 Ski
Product Forecast Retailers Retailers
Sketches Committee order in
Apr-Jun 93
Sales and Replenishing Process:
Labour $0.78
Transportation within China and $2.00
China overhead
China quota, obersport profit and $9.90
overhead
Total $42.68
Parkas
Wally studied the committee forecasts
Estimated the early production of each style
Demand and forecasts for last year analyzed
Standard deviation of demand was twice the standard
deviation of buying committee forecasts
Forecast distribution for each style as a normal random
variable
With mean equal to average of committee forecasts
Standard deviation twice of committee forecasts
COMMITTEE FORECAST- 10 STYLES OF WOMENS
PARKA Individual Forecast
Totals 20,000
Parkas
Wally also had to decide the location for production for
each style ( Hong Kong or China)
It was planned this year to produce 50% of products in
China
There was risk of managing production and inventory in
longer term
The larger minimum order size of China limits the capacity
of companys ability to increase the range of products
China trade relationship with USA - Risky
COMPARISON OF OPERATIONS IN
HONG KONG AND CHINA
Strengths: Weaknesses:
History of product innovation Excessively long lead times,
Buying committee forecasts balance though this is the nature of the
expectations industry
Experienced leadership and focused Minimum order quantity at
management team Chinese manufacturers
Deliver products to retailers early in Leftover unpopular merchandise
the selling season at end of selling period.
Variety of SKUs, with color/size Stock outs on most popular
product diversity items during peak selling
Use of greige fabric delays product
differentiation
Opportunities: Threats:
Aggressive marketing campaign Competition from value-
Expanding sales to European/ oriented sellers like Columbia.
South American markets Regulatory limits of goods that
Sponsorship of major winter can be imported into US.
sports events
Case Discussion Questions
improve performance?
STANDARD FIRST-PERIOD
MEAN OF DEVIATION PRODUCTION QUANTITY
DEMAND OF DEMAND
STYLE
Max (0, k )
Gail 1017 388 1017
Isis 1042 646 1042
Entice 1358 496 1358
Assault 2525 680 2525
Teri 1100 762 1100
Electra 2150 807 2150
Stephanie 1113 1048 1113
Seduced 4017 1113 4017
Anita 3296 2094 3296
Daphne 2383 1394 2383
Sum---> 20,001 20,001 <---Sum
Too much!
Solving Wallys Sample Problem (with k=2)
DETERMINING SPECULATIVE PRODUCTION QUANTITIES
k =2 <---Find value of k that makes last column sum to about 10,000
STANDARD FIRST-PERIOD
MEAN OF DEVIATION PRODUCTION QUANTITY
DEMAND OF DEMAND
STYLE
Max (0, k )
Gail 1017 388 241
Isis 1042 646 0
Entice 1358 496 366
Assault 2525 680 1165
Teri 1100 762 0
Electra 2150 807 536
Stephanie 1113 1048 0
Seduced 4017 1113 1791
Anita 3296 2094 0
Daphne 2383 1394 0
Sum---> 20,001 4,099 <---Sum
Too little!
Solving Wallys Sample Problem (with k=1)
DETERMINING SPECULATIVE PRODUCTION QUANTITIES
k =1 <---Find value of k that makes last column sum to about 10,000
STANDARD FIRST-PERIOD
MEAN OF DEVIATION PRODUCTION QUANTITY
DEMAND OF DEMAND
STYLE
Max (0, k )
Gail 1017 388 629
Isis 1042 646 396
Entice 1358 496 862
Assault 2525 680 1845
Teri 1100 762 338
Electra 2150 807 1343
Stephanie 1113 1048 65
Seduced 4017 1113 2904
Anita 3296 2094 1202
Daphne 2383 1394 989
Sum---> 20,001 10,573 <---Sum
Too much!
Solving Wallys Sample Problem (with k=1.0608)
DETERMINING SPECULATIVE PRODUCTION QUANTITIES
k = 1.0608 <---Find value of k that makes last column sum to about 10,000
STANDARD FIRST-PERIOD
MEAN OF DEVIATION PRODUCTION QUANTITY
DEMAND OF DEMAND
STYLE
Max (0, k )
Gail 1017 388 605
Isis 1042 646 357
Entice 1358 496 832
Assault 2525 680 1804
Teri 1100 762 292
Electra 2150 807 1294
Stephanie 1113 1048 1
Seduced 4017 1113 2836
Anita 3296 2094 1075
Daphne 2383 1394 904
Sum---> 20,001 10,000 <---Sum
Just right!
Question 1. and 3. Comparison units of each style
when produced in HK and China
Differences between production in HK and China
Inventory
Total Cost
Operation Time
Quality (% Repair)
Question 1. and 3. The differences between
production in HK and China
Question 1 (Alternative approach)
We have three types of products:
-Low risk: risk % between 0 and 40
-Medium risk: risk % between 41 and 59
-High risk: risk % above 60
To minimize the risk, we decided to order the
following quantity:
-Low risk items: 75% of the average forecast
-Medium risk items: 50% of the average forecast
-High risk items: 25% of the average forecast
Question 1 (Alternative approach)
2. Can you come up a measure of risk
associated with an your ordering
policy? This measure should be
quantifiable.
Whats the result if there is
demand forecasting uncertainty?
Standard Standard
deviation deviation
Demand Average
How we assess
forecast certainty?
Risk based
production planning
Seattle
Hong Kong
Establish Distribution
Center in Seattle without
through Denver
OPERATIONAL Changes:
INFORMATION SYSTEM
Concern Concern
Smaller lot sizes Quality & Reliability
Higher labor cost
Slower
Less flexible
Where is better?
Short term Long term
RECOMMENDATION #3 (continued)
From the items with long lead times, increase the amount of
safety stock inventory for those items that are inexpensive
(e.g., buttons) and/or shared by many parkas (e.g., black fabric).
RECOMMENDATION #5 (continued)