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Prepared by: Shaheen Sardar
SCM Lab. Department of Industrial and Management Engineering, Hanyang University, South Korea.
Case Study: Sport Obermeyer
Company History:
“Skiing is a celebration of life”Klaus Obermeyer
1947: Klaus Obermeyer, a German immigrant began teaching at the Aspen (U.S.) Ski School
Company History:
1985: Obersport; a joint venture in Hong Kong, the company began to increase productivity to meet their new demands.
Women’s Collection
Competitors
The Jacobs Corporation
founded by David L. Jacobs Biography
Competitors
The North Face, Inc.
: subsidiary of VF Corporation
Competitors
Burton Snowboards
founded by Jake Burton Carpenter
Innovative Burton outerwear performance meetsleading 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
Long lead times: Long lead times: It’s November 1992 and the company is starting to
make firm commitments for its 1993 – 1994 season. Based on experience, Intuition and sheer speculation No feedback from retailers (Las Vegas trade show in March 1993) Inaccurate forecasts of retailer demand
• Company’s inability to predict correctly (which product would become best seller) resulted in:
Excess merchandise and sold at deep discount Or company ran out of most popular items (lost sales)
Problem Statement
• How can Sport Obermeryer Ltd.:
Improve its forecasting method
Achieve a more dynamic manufacturing
capability in order to reduce final inventory
Increase profits
Become more competitive in the industry
Manufacturing Structure:
Sport Obermeyer Ltd.
Obersport Ltd.
Alpine Ltd• Hong Kong
• Macau• China
Lo Village
Other subcontractors
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
• Obermeyer’s Share: • 45% of children skiwear mkt.
• 11% of adult skiwear mkt.
• Offering an excellent price/ value relationship to target group
Obermeyer Product
• Example (Adult man)– Fred (conservative, basic)– Rex (rich, latest fabrics and technologies)– Beige (mountaineering type skier, high technical performance)– Klausie (showy, latest fashions)
• Each Gender– Styles– Colors– Sizes
• Total Number of SKU’s (stock-keeping units): ~800• Deliver matching collections simultaneously• Deliver early in the season
The Supply Chain (Asia to Aspen (U.S.))• Obermeyer sourced most of its products through Obersport
• Obermeyer would contract with fabric supplier for specified amount of fabric
each month
• Lead time taken into account for all materials
• Most tasks performed only after production quantity planned by Obermeyer
• Obersport: Joint venture between Sport Obermeyer and its Hong Kong partner.
• Obersport is responsible for fabric and component sourcing for apparel
production and monitoring product quality at subcontractor factories.
Textile and Accessories Suppliers
Apparel
Manufactures
Obersport Retailers
The Supply ChainTextile and Accessories Suppliers
Apparel Manufacturers
Sport Obermeyer
Retailers
Obersport
Produce, dye and print shell and lining fabrics, supply insulation, zippers, thread, logo patches and snaps.
Subcontractors, receive production orders and materials from Obersport. Cut, sew and final assembly.
Responsible for material and production sourcing in the Far East. It also acts as a distribution centre for materials and finished goods.
Product design, production planning and sales.
Purchase from Sport Obermeyer and sell products to consumers.
Product TransportationHong Kong Warehouse
Seattle
Obermeyer’s Denver Warehouse
then transported by trucks
goods produced in August were air-shipped
Retailers
orders were finally shipped via small-package carriers such as
UPS (United Parcel Service) at the end of August 1993
Cost $5 per parka
products made in June and July were transported by
ships
Retailers
Specialty Ski-Retail Stores
Department Stores
Direct Mail Retailers
Consumers
Most sales occur between September and January
Delivering products by early September
Sport Obermeyer
Production Options
• Hong Kong– More expensive– Smaller lot sizes– Faster– More flexible
• Mainland (Guangdong, Lo Village)
– Cheaper– Larger lot sizes– Slower– Less flexible
Obersport Limited
Obersport Ltd
• To coordinate production of sport obermeyer’s products in Far East
• Responsible for fabric and component sourcing
Joint Venture formed in 1985 by
• Klaus Obermeyer’s Son – Wally (Harvard Educated)
• Raymond Tse – Owner of Alpine- 80% order of Sport obermeyer
• Klaus entrusts Raymond Tse to make all decisions regarding production and investment
Design Process Las Vegas Concept Sketches sent Designs begins Show Finalise to Obersport Finalised
Feb 92 Mar 92 May 92 Jul 92 Sep 92
Nov 92 Mar 93 Apr 93 - Jul 93 Dec 93-Feb 94
Place 1st Production Las Vegas Additional Replenishment Order with Obersport Show orders received orders received
Prototype, Sample Production
Full scale production
Planning and Production Cycle:
The Effect of Minimum Order Quantities
• Ideally, during Speculative Production, we want to order a specific quantity of a parka style, and then, during Reactive Production, we want to “fine tune” the parka’s remaining supply by ordering as few or as many as the indicated by the revised forecast after Las Vegas.
• However, a large minimum order quantity for a particular style of parka forces us to order either many parkas or none.
• Thus, a minimum order quantity significantly reduces the ability to “fine tune” during Reactive Production.
Sport Obermeyer’s Time Lineand
“Speculative” versus “Reactive” Production
Feb … Oct Nov … Mar April … Aug Sept Oct Nov Dec Jan Feb Mar Apr1992 … 1992 1992 … 1993 1993 … 1993 1993 1993 1993 1993 1994 1994 1994 1994
Line. of 1993-94 Line
8 months
Productionof 1993-94 Line (peak selling in Dec & Jan)
"Reactive"Production
5 months9 months 5 months
"NOW" Initial
Forecast
In Feb 1994, start design of 1995-96 line.
Selling of
In Feb 1993, start design of 1994-95 line.
Las Vegas Revised Forecast 27 Months
1993-94 Line
Design of
1993-94
"Speculative"
“Speculative” Production “Reactive” Production
Components
Greige Shell Fabric
Finishing of Shell Fabric (Dying & Printing)
Finished Lining Fabric
Insulation
Zippers
Thread
Logo Patches, Drawcords, Hang Tags, etc.
Snaps (undyed)
Dyeing of Snaps
Procurement lead time
45 – 90 days
45 – 60 days
45 – 60 days
2 – 3 weeks
Standard (HK) 60 days, Custom (JP) 90+ days
30 days
15 – 30 days
1 – 2 months
15 – 30 days
Asia6 weeks
Fabric Producer
Fabric Dyer Cut/Sew Factory
Denver Warehouse
Retailer
Un-dyed greige goods Consumer6 weeks
6 weeks
Production Process:
Factories in Hong Kong
Seattle warehouse
800 Ski RetailersProduct
SketchesForecast
Committee
Forecasts
Order 20% in Apr-Jun
93
Order 80% in Mar 93
Retailers order in
Apr-Jun 93
Denver warehouse
6 weeksOrdering and Shipment Process:
Sales and Replenishing Process:
Peak Sales
Aug 93 Sep 93 Oct 93 Nov 93 Dec 93 Feb 94
Sales
Re-Sales
Stock outs (+24 % of whole sale price)
Market downs (-8% of wholesale price)
Parkas
• Obermeyer produce 200,000
parkas every year
• Capacity: 3,60,000 each year
• Earn 24% of wholesale price
on each
• Unsold in season: sold at a
loss of 8%
• Profit of US$ 27 and loss of
US$9 on each parkas
• Buying committee forecasts
for 10 style of Parkas
Issue faced by Wally• How to make best use of forecasts by various members for
production commitment
• How to allocate production between factories at Hong Kong and China
• Last year 1/3rd Parkas was made in China.
• Company plan to produce 50% parkas in China as
labor cost in China is low
require larger minimum order
some concern of quality and reliability is there
Obermeyer Landed Cost:
Cost FOB Obersport $42.68
Agent’s fee (to Obersport, 7%) $2.98
Freight (Ocean Carrier) $1.40
Duty, insurance and miscellaneous $4.90
Total landed cost $51.92
Cost FOB Obersport:
Material $30.00
Labour $0.78
Transportation within China and China overhead
$2.00
China quota, obersport profit and overhead
$9.90
Total $42.68
ESTIMATED COST INFORMATION FOR ROCOCO PARKA (IF ASSEMBLED IN CHINA)
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
variableWith mean equal to average of committee forecastsStandard deviation twice of committee forecasts
COMMITTEE FORECAST- 10 STYLES OF WOMEN’SPARKA – Individual Forecast
Style Price Laura Carolyn Greg Wendy Tom Wally
Gail $110 900 1,000 900 1,300 800 1,200
Isis $99 800 700 1,000 1,600 950 1,200
Entice $80 1,200 1,600 1,500 1,550 950 1,350
Assault $90 2,500 1,900 2,700 2,450 2,800 2,800
Teri $123 800 900 1,000 1,100 950 1,850
Electra $173 2,500 1,900 1,900 2,800 1,800 2,000
Stephanie $133 600 900 1,000 1,100 950 2,125
Seduced $73 4,600 4,300 3,900 4,000 4,300 3,000
Anita $93 4,400 3,300 3,500 1,500 4,200 2,875
Daphne $148 1,700 3,500 2,600 2,600 2,300 1,600
Totals 20,000 20,000 20,000 20,000 20,000 20,000
COMMITTEE FORECAST- 10 STYLES OF WOMEN’SPARKA – Individual Forecast
Style Average Forecast Standard deviation 2 x Standard
Deviation
Gail 1,017 194 388
Isis 1,042 323 646
Entice 1,358 248 496
Assault 2,525 340 680
Teri 1,100 381 762
Electra 2,150 404 807
Stephanie 1,113 524 1,048
Seduced 4,017 556 1,113
Anita 3,296 1,047 2,094
Daphne 2,383 697 1,349
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 company’s ability to increase the range of products
• China trade relationship with USA - Risky
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 hours/years
During peak production periods, workers work 13 hours/day, 6.5 days/week
Weekly (non-peak output/worker)
19 parkas 12 parkas
COMPARISON OF OPERATIONS IN HONG KONG AND CHINA
Topic Hong Kong China
Actual labour content per parka (incl repair work)
-2.35 hours -3.6 hours
Paid labour time per parka (incl repair work)
-2.53 hours/parka -4.88 hours/parka
Labour cost /garment HK$75.6 RMB 4.45
Line configuration 10-12 people/line 40 people/line
Training Cross-trained Trained for single operation only
Min order quantity 600 units in same style 1200 units in same style
Repair rate 1-2% -10%
Challenges Wage rate, WorkforceLow unemploymentYounger worker prefer office job
WorkforceLess quality and cleanliness conscious
Training requirements
COMPARISON OF OPERATIONS IN HONG KONG AND CHINA
Sport Obermeyer’s Relationship with Obersport
• In this global supply chain,
• Sport Obermeyer operates in the US and specializes in the demand side by coordinating activities such as• monitoring fashion trends,
• designing the parkas, and
• selling the parkas by entering into relationships with retailers.
• Obersport operates in Hong Kong and China and specializes in the supply side by coordinating activities such as• procuring fabric and components (e.g., zippers) and
• arranging for production using either independent subcontractors or factories of Alpine (a company owned by Obersport’s managing director).
Sport Obermeyer’s Relationship with Obersport (Continued)
• Global supply chains are frequently composed of different companies, with each company having a
• a different geographical location,
• a different knowledge set
• a different skill set, and/or
• a different set of business relationships.
• Sport Obermeyer should NOT eliminate its business relationship with Obersport. Instead, it should retain its relationship and seek to improve the coordination between Sport Obermeyer’s demand-side activities and Obersport’s supply-side activities.
SWOT Analysis
Strengths:• History of product innovation• Buying committee forecasts balance expectations• Experienced leadership and focused management team • Deliver products to retailers early in the selling season• Variety of SKUs, with color/size product diversity• Use of greige fabric delays product
differentiation
Weaknesses:• Excessively long lead times,
though this is the nature of the industry
• Minimum order quantity at Chinese manufacturers
• Leftover unpopular merchandise at end of selling period.
• Stock outs on most popular items during peak selling
Opportunities:• Aggressive marketing campaign• Expanding sales to European/
South American markets• Sponsorship of major winter
sports events
Threats:• Competition from value-
oriented sellers like Columbia.• Regulatory limits of goods that
can be imported into US.
Case Discussion Questions
1. Using the sample data given in Table 2-20, make a
recommendation for how many units of each style Wally
should make during the initial phase of production. Assume
that all of the 10 styles in the sample problem are made in
Hong Kong and that Wally’s initial production commitment
must be at least 10,000 units. Ignore price differences among
styles in your initial analysis.
2. Can you come up with a measure of risk associated with your
ordering policy? This measure should be quantifiable.
Case Discussion Questions
3. Repeat your methodology and assume now that all 10 styles
are made in China. What is the difference (if any) between the
two initial production commitments?
4. What operational changes would you recommend to Wally to
improve performance?
5. How should Wally think (both short-term and long-term) about
sourcing in Hong Kong versus China? What kind of sourcing
policy do you recommend?
Solving Wally’s Sample Problem (with k=0)
Too much!
D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S
k = 0 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0
S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D
S T Y L EG a i l 1 0 1 7 3 8 8 1 0 1 7I s i s 1 0 4 2 6 4 6 1 0 4 2
E n t i c e 1 3 5 8 4 9 6 1 3 5 8A s s a u l t 2 5 2 5 6 8 0 2 5 2 5
T e r i 1 1 0 0 7 6 2 1 1 0 0E l e c t r a 2 1 5 0 8 0 7 2 1 5 0
S t e p h a n i e 1 1 1 3 1 0 4 8 1 1 1 3S e d u c e d 4 0 1 7 1 1 1 3 4 0 1 7
A n i t a 3 2 9 6 2 0 9 4 3 2 9 6D a p h n e 2 3 8 3 1 3 9 4 2 3 8 3
S u m - - - > 2 0 , 0 0 1 2 0 , 0 0 1 < - - - S u m
),0( kMax
Solving Wally’s Sample Problem (with k=2)
D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S
k = 2 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0
S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D
S T Y L EG a i l 1 0 1 7 3 8 8 2 4 1I s i s 1 0 4 2 6 4 6 0
E n t i c e 1 3 5 8 4 9 6 3 6 6A s s a u l t 2 5 2 5 6 8 0 1 1 6 5
T e r i 1 1 0 0 7 6 2 0E l e c t r a 2 1 5 0 8 0 7 5 3 6
S t e p h a n i e 1 1 1 3 1 0 4 8 0S e d u c e d 4 0 1 7 1 1 1 3 1 7 9 1
A n i t a 3 2 9 6 2 0 9 4 0D a p h n e 2 3 8 3 1 3 9 4 0
S u m - - - > 2 0 , 0 0 1 4 , 0 9 9 < - - - S u m
),0( kMax
Too little!
Solving Wally’s Sample Problem (with k=1)D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S
k = 1 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0
S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D
S T Y L EG a i l 1 0 1 7 3 8 8 6 2 9I s i s 1 0 4 2 6 4 6 3 9 6
E n t i c e 1 3 5 8 4 9 6 8 6 2A s s a u l t 2 5 2 5 6 8 0 1 8 4 5
T e r i 1 1 0 0 7 6 2 3 3 8E l e c t r a 2 1 5 0 8 0 7 1 3 4 3
S t e p h a n i e 1 1 1 3 1 0 4 8 6 5S e d u c e d 4 0 1 7 1 1 1 3 2 9 0 4
A n i t a 3 2 9 6 2 0 9 4 1 2 0 2D a p h n e 2 3 8 3 1 3 9 4 9 8 9
S u m - - - > 2 0 , 0 0 1 1 0 , 5 7 3 < - - - S u m
),0( kMax
Too much!
Solving Wally’s Sample Problem (with k=1.0608)
D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S
k = 1 . 0 6 0 8 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0
S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D
S T Y L EG a i l 1 0 1 7 3 8 8 6 0 5I s i s 1 0 4 2 6 4 6 3 5 7
E n t i c e 1 3 5 8 4 9 6 8 3 2A s s a u l t 2 5 2 5 6 8 0 1 8 0 4
T e r i 1 1 0 0 7 6 2 2 9 2E l e c t r a 2 1 5 0 8 0 7 1 2 9 4
S t e p h a n i e 1 1 1 3 1 0 4 8 1S e d u c e d 4 0 1 7 1 1 1 3 2 8 3 6
A n i t a 3 2 9 6 2 0 9 4 1 0 7 5D a p h n e 2 3 8 3 1 3 9 4 9 0 4
S u m - - - > 2 0 , 0 0 1 1 0 , 0 0 0 < - - - S u m
),0( kMax
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.
-Stock outs (-24 % whole sale price)-Market downs( -8% of wholesale price)-(Old) designs-High inventory holding cost-Unable to fully profit from hit products
What’s the result if there is demand forecasting uncertainty?
Forecasts are always uncertain
Why does risk happen?
Demand Average
Standard deviation
Standard deviation
How we assessforecast certainty?
1 . Based on historical data - Past forecast error - Variability of demand
2. Rather than producing one joint forecast, each member of the purchasing committee produces his/her own forecast .
Obermeyer’s Buying committee
3. The deviation in views (of Buying committee) is good estimator of forecast reliability
Table of standard deviation vs. Coefficient of variation
C.V. = Standard Deviation / Mean
4. How is this information helpful?
- Using Early production Capacity (Speculative capacity) for Assault and Seduced- Reserve later production Capacity (reactive capacity) for Daphne and Anita as demand become more apparent
“Risk –based production planning”
4. What operational changes would you recommend to Wally to improve performance?
• Ski Clothes is fashionable product, Its life cycle is short
• Long time of planning and production activities
• Uncertain forecasting due to customer demand
• Fashion taker >> No R&D
KEY Problems:
• Reducing number of styles handled and to predict customer demand for individual style.
• To create promotion strategy to persuade retailers to order.
OPERATIONAL Changes:
PRODUCTION SYSTEM
•Increasing production Quality of China to be closed to Hong Kong.
• To reduce lead time of production especially the preparation of raw materials.
OPERATIONAL Changes:
Lead time reduction
• Fabric dyer lead time of several months
• Dyer has long lead time on greige goods and needed to keep their capacity utilized year round but can change colors overnight
• Obermeyer can predict total annual sales and sales of basic colors, but can’t predict fashion colors
Fabric Producer
Fabric Dyer Cut/Sew Factory
Denver Warehouse
Retailer
undyed greige goodsSport Obermeyer
Asia
Consumer
Solution:
• Offer dyer one year commitment on greige goods and capacity
• Dye basic colors early in year and fashion colors late in season on few days notice
SUPPLY CHAIN SYSTEM
• Increase bargaining power with suppliers by ordering via big supplier that can commit on timeline
• Collect stock raw materials which is base on Ski cloth production
OPERATIONAL Changes:
•Increase distribution channel to a country that have different period of product usage
•Increase services level requirements
•Establish DC in Seattle to reduce lead time and cost from inland transportation from Seattle to Denver
OPERATIONAL Changes:
Hong Kong
Seattle
Original distribution process
Establish Distribution Center in Seattle without
through Denver
INFORMATION SYSTEM
• Collect the data backward and analyze the demand of the show in Vegas and compare with actual purchase.
• Speedup data/information analysis and utilize historical data / Committee forecasting / Research and Trend & Market Movement.
OPERATIONAL Changes:
5. How should Wally think (both short term and long term) about sourcing in Hong Kong versus China?
What kind of sourcing policy do you recommend?
Production Options• Hong Kong
– Faster– More flexible– High / Reliable
Quality– Better for higher
risk designs
• Concern– Smaller lot sizes– Higher labor cost
• China (Guangdong, Lo Village)
– Lower labor cost– Larger lot sizes– Better for lower risk
designs
• Concern– Quality & Reliability– Slower– Less flexible
Where is better?
Short term Long term
Hong Kong China
Recommendations to Wally
RECOMMENDATION #1. Improve the demand forecasts made
internally by the Buying Committee in November (1992) just
before Speculative Production.
Instead of using just a simple average of the individual forecasts
made by Laura, Carolyn, Greg, Wendy, Tom and Wally use a
weighted average, with the weights reflecting past accuracy.
Recommendations to Wally(continued)
RECOMMENDATION #2. Obtain market feedback earlier than Las Vegas, thereby converting some Speculative Production to Reactive Production.
Sport Obermeyer can invite selected retailers to come in January to Aspen for an all-expenses-paid “Early Order Weekend”, where there is time for a “sneak preview” of the new line, some recreational skiing and socializing, and then the early placement of orders at a discount.
To maximize the value of the market feedback, Sport Obermeyer’s “guest list” should include both large and small retailers and both urban and resort retailers.
Recommendations to Wally(continued)
RECOMMENDATION #3. Decrease lead times for both raw materials and finished goods, thereby allowing more time to utilize existing capacity.
Since the business strategy should emphasize Dependability more than Cost, lead-times can be reduced using some or all of the following methods:•Choose suppliers of raw materials more on the basis of D than C.•Speed up orders through information sharing with suppliers.•Speed up shipments using faster (but more expensive) shippers.•Establish some local (but more expensive) production capacity for “last minute” production.
RECOMMENDATION #3 (continued)
Other ways to reduce lead times include:
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).
Simplify the parkas’ designs so that they can share as many
components as possible. For example, are 100,000 varieties of
zippers really necessary?
Recommendations to Wally(continued)
Recommendations to Wally(continued)
RECOMMENDATION #4. Increase production capacity by:
• Using more subcontractors,
• Using more overtime in China, and/or
• Exploring an alliance with a swimwear manufacturer who can “supply” excess capacity when Sport Obermeyer needs it and “consume” capacity when Sport Obermeyer has excess capacity.
Recommendations to Wally(continued)
RECOMMENDATION #5. Decrease minimum order quantities,
thereby improving the ability to “fine tune” during Reactive
Production.
Minimum order quantities occur because there are long “set-up
times” when switching from the production of one style of parka
to another, thereby making it uneconomical to have “short runs”.
Recommendations to Wally(continued)
Sport Obermeyer can decrease the minimum order quantities by providing incentives to its suppliers to have more flexible production lines.
This increased flexibility can come from:
Improved process design (e.g., a cellular production system).
Improved equipment (e.g., more flexible cutting machines).
RECOMMENDATION #5 (continued)
Thank You