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SPORT OBERMEYER CASE STUDY

Group No: 8
1. Anirudh Manish Sinha (17PGP020)
2. Anjali John (17PGP021)
3.Aravind N (17pgp027)
4. Arun Balan (17PGP031)
5. Binu R (17PGP039)
6. Devesh Kumar (17PGP050)
7. N Pavithra (17PGP079)
8. Navya U (17PGP084)
CASE OVERVIEW
• Origin traced to 1947 Klaus Obermeyer
• Founder: Klaus Obermeyer • Providing value to customers
• Originally from Germany • Trust
• Engineer by training
• Intuitive style
• Headquartered in Aspen, Colorado
• More importance to his experience
• Introduced the first Goose-down vest
Wally Obermeyer
• Obermeyer offers a line of fashion ski apparels- vests, ski
suits, shells, ski pants, sweaters and other accessories • Relied heavily on formal data gathering and
• Committing to production quantity of each Skiwear item analytical techniques
the company would offer in the coming years.
• How to allocate between companies in Hong Kong and
China
TIMELINE

Final Design
Design • September 1992
• February 1992 • Sample Production

Prototypes Production
• July 1992 • November 1992
• Designs sent to Obersports • 1st Production Order
TIMELINE

Las Vegas Show Seattle Replenishment Orders


• March 1993 • June-July 1993 • December 93-February 94

Additional Orders Delivery to Retailers


• April-July 1993 • September 1993
SUPPLY CHAIN
INITIATIVES TO MAKE THE SUPPLY CHAIN MORE FLEXIBLE
• Forcing their designers and their merchandisers to work together and standardize the
materials to purchase
• Anticipating on the raw materials to use, buying them in advance, and placing them in
warehouses
• Keeping the materials (before production) as undifferentiated as possible until they have
to be dyed, cut and sewn
• Booking the factories’ production capacity in advance, and then deciding on the exact
colors and styles to produce as soon as orders are received
• Making the most predictable styles first, and saving the capacity for highly unpredictable
products at the last moment
• When the quantity of a style represents many times the minimum required order, it is cut
in several production runs that are processed at different times
• Sending part of the production by plane
HOW MANY UNITS OF EACH STYLE WALLY SHOULD ORDER DURING INITIAL
PHASE OF PRODUCTION? ASSUME ALL STYLES IN SAMPLE PROBLEM ARE MADE
IN HONG KONG, AND INITIAL COMMITMENT OF WALLY IS 10,000 UNITS.

Individual Forecast Hong Kong

Style Price Laura Carolyn Greg Wendy Tom Wally Avg. Forecast SD 2*SD Produce (Avg - 2SD) Produce (Avg - 2SD)

Gail 110 900 1000 900 1300 800 1200 1017 194 388 629 629

Isis 99 800 700 1000 1600 950 1200 1042 323 646 395 600

Entice 80 1200 1600 1500 1550 950 1350 1358 248 496 863 863

Assault 90 2500 1900 2700 2450 2800 2800 2525 340 680 1845 1845

Teri 123 800 900 1000 1100 950 1850 1100 381 762 338 600

Electra 173 2500 1900 1900 2800 1800 2000 2150 404 807 1343 1343

Stephaine 133 600 900 1000 1100 950 2125 1113 524 1048 65 600

Seduced 73 4600 4300 3900 4000 4300 3000 4017 556 1113 2904 2904

Anita 93 4400 3300 3500 1500 4200 2875 3296 1047 2094 1202 1202

Daphne 148 1700 3500 2600 2600 2300 1600 2383 697 1394 990 990

Totals 20000 20000 20000 20000 20000 20000 20000 NA NA 10572 11573
HOW MANY UNITS OF EACH STYLE WALLY SHOULD ORDER DURING INITIAL
PHASE OF PRODUCTION? ASSUME ALL STYLES IN SAMPLE PROBLEM ARE MADE
IN HONG KONG, AND INITIAL COMMITMENT OF WALLY IS 10,000 UNITS.

Classification Forecast Based On Classification


• Low Risk - % between 0 and 40 • Low Risk – 75% of average forecast
• Medium Risk - % between 41 and 59 • Medium Risk - 50% of average forecast
• High Risk - % above 60 • High Risk - 25% of average forecast
Risk formula = 2*SD/Average
HOW MANY UNITS OF EACH STYLE WALLY SHOULD ORDER DURING INITIAL
PHASE OF PRODUCTION? ASSUME ALL STYLES IN SAMPLE PROBLEM ARE MADE
IN HONG KONG, AND INITIAL COMMITMENT OF WALLY IS 10,000 UNITS.
Hong Kong Forecast based on risk

Avg. Forecast SD 2*SD Produce (Avg - 2SD) Produce (Avg - 2SD) Avg quantity(%) Risk Classification Produce

1017 194 388 629 629 5.08% 38.18% Low 763

1042 323 646 395 600 5.21% 62.04% High 600

1358 248 496 863 863 6.79% 36.49% Low 1019

2525 340 680 1845 1845 12.63% 26.95% Low 1894

1100 381 762 338 600 5.50% 69.23% High 600

2150 404 807 1343 1343 10.75% 37.56% Low 1613

1113 524 1048 65 600 5.56% 94.18% High 600

4017 556 1113 2904 2904 20.08% 27.71% Low 3013

3296 1047 2094 1202 1202 16.48% 63.53% High 824

2383 697 1394 990 990 11.92% 58.48% Medium 1192

20000 NA NA 10572 11573 NA NA NA 12116


RECOMMENDATIONS
Technical improvement
 Improve the production quality of China factory to mainly concentrate on parkas
 Reduce Lead time by obtaining raw materials from geographically closer locations
 Reducing lot size to decrease the production during initial demand phase
 Increasing re-active capacity by focusing more on styles that are in demand
 Collect sample data from the buying committee's forecast and correlate it with Obermeyer's top
selling products
 Conducting periodic market research with lead users and at Obermeyer’s retail stores

Quality improvement
 Build a dedicated R&D team to develop product and make a better forecasting
 Invest in training workers at the Hong Kong facility
 Improving the service level in order to widen and accelerate the distribution channel
How should operations manager think about souring in Hong Kong vs China?
Hong Kong Pros Hong Kong Cons China Pros China Cons
Skilled Workforce Higher Labor Costs Lower Labor Costs Less Skilled Workforce
Flexible Production Limited Future Workforce Large Workforce Pool Less Flexible Response
Faster Production Slower Production
High Quality Outputs Increased Quality Risks
Lower Minimum Orders Higher Minimum Orders
Better US Trade Relations US Trade Relations Risks

• Hong Kong is best for sample production, lot size orders (under 1,200 units), and for providing flexibility
and faster response at better quality standards needed to response to unanticipated market trends
• Hong Kong is better suited for sourcing higher risk styles
• China is better suited for sourcing lower risk styles and for larger lot sizes orders (over 1,200 units)
• Longer term strategy should include leveraging relationship, through Obersport Ltd. And Alpine Ltd., to
improve training, quality control, and production methods for factory in China to reduce risks while taking
advantage of lower prices
CONCLUSION

1. Forecast by trend reference push and pull strategy

2. China factory has minimum order quantity about 1,200 units in same style, while Hongkong
Factory has minimum order about 600 units in same style. Based on the calculation, there
are 4 styles which is going to be produced in China factory, such as Assalut (1845 units),
Electra (1343 units), Seduced (2904 units), and Anita (1202 units). The rest style will be
produced in Hongkong.