Group 3: Abdollah Mohammadi

Candice Benson

Brandon Bell

Praful Rapariya

October 6, 2015

Case Study: Sports Obermeyer Ltd.

AGENDA

Background

About Sports Obermeyer

Obermeyer Supply Chain Management

Challenges in Supply Chain

Obermeyer Order cycle

Production planning

Lead time

Operational recommendation

BACKGROUND

Established in Aspen Colorado by Klaus Obermeyer in 1947.

Immigrated from Germany to be instructor at Aspen ski school.

Inspired by students to make better clothes for skiing conditions.

Responsible for making the 1st goose down vest and ski brake

SPORTS OBERMEYER LTD.

They produce parkas, ski jackets, ski pants, sweaters, turtlenecks and other accessories.

Products offered in five different gender men, women, boys, girls and preschoolers.

In 1992, Obermeyer held 45% of the children skiwear market.

Sales in 1992 reached almost $33 million.

11% of the adult skiwear market.

Over 85% of product sold to customer to use during skiing

Manufacturing Subsidiary Obersport, Ltd

OBERSPORT LTD.

Established in 1985 by joint venture Klaus Obermeyer and Raymond Tse.

Coordinated Sport Obermeyer production in the far east.

Responsible for fabric and component sourcing.

Material sourced was produced in Alpine. Ltd owned by Raymond.

Manufacturing plants located in Hong Kong, Macau and China.

Obermeyer Supply Chain Management

Source MoveMake Store

Supply Chain Process Flow

Textiles and Accessories Suppliers

Apparel Manufacturers

ObersportSports

Obermeyer Retailers

OBERMEYER CHALLENGES IN SUPPLY CHAIN

Challenges

Long Lead Time Inaccurate forecast of retailers demand

Production allocation difficulties in China

and Hong Kong

OBERMEYER ORDER CYCLE 1993-1994 LINE

• Design process begins

• Las Vegas show for 92-93 line

• Concept finalized • Sketches send to

Obersport• Prototype

production • Design finalized

• First production order with Obersport.

• Calculate requirement

• Order components

• Print dye orders • Sample

production

• First orders through ships ( June-July)

• Addition orders through air freight (Aug)

• Orders received in Aug

• Peak selling period Dec and Jan.

• Discount period start March.

• Las Vegas Show for 93-94 line.

• 80% of retailers order received.

• Second production order with Obersport.

• Full scale production.

Design Activity (Feb-Sep)- 92

Production Planning

(Oct 92 – Jan 93)

New Line Promotions

(Jan-Mar)-93

Shipping and Handling

(June-Aug)-93

Retail Activity (Sep 93- April 94)

LEAD TIME

What is the production lead time of ski wear 10 months: February to August

What are the factors that contribute to lead times being so long?

Chinese New Year

Assembly line production

LEAD TIME CONT.

What are the operational and competitive results of these long lead times?

Loss of sales if dates are not met

Change of tastes

10 style of women parka

At least 10,000 units of initial production

All made in Hong Kong

How many of each style should be ordered?

PRODUCTION PLANNING

Forecast Data

Style

Seduced 4,017 1,113

Assault 2,525 680

Electra 2,150 807

Entice 1,358 496

Anita 3,296 2,094

Daphne 2,383 1,394

Isis 1,042 646

Teri 1,100 762Stephanie 1,113 1,048

Gail 1,017 388

http://www.obermeyer.com/womens-ski-jackets

Normal Distribution of Demand

Prod. Q. Over. Pr.

50.00%

15.87%

2.28%

0.13%

Forecast Data Production

Style

Seduced 4,017 1,113 4,017 2,904 1,791Assault 2,525 680 2,525 1,845 1,165Electra 2,150 807 2,150 1,343 536Entice 1,358 496 1,358 862 366Anita 3,296 2,094 3,296 1,202 0Daphne 2,383 1,394 2,383 989 0Isis 1,042 646 1,042 396 0Teri 1,100 762 1,100 338 0Stephanie 1,113 1,048 1,113 65 0

Gail 1,017 388 1,017 629 241

Total 20,000 - 20,000 10,573 4,099 10,000

2,8361,8041,294832

1,075904357292

1

605

?=1.0

6

PRODUCTION PLANNING(NO MIN. ORDER QUANTITY)

PRODUCTION PLANNING(WITH MIN. ORDER QUANTITY)

Reminder: All parkas made in Hong Kong (m=600)

General Idea: to produce high demand or low demand styles so that we are pretty sure either there will be stock out or overstock.

Three risk categories and risk factor:

Category 1 (Safe):

Category 2 (Pretty Safe):

Category 3 (Not Safe):

Category 3

Category 2 Category 1

PRODUCTION PLANNING(WITH MIN. ORDER QUANTITY)

Forecast Data Risk Parameters

Style Mean Std. Dev. ()

Risk Category Safety Factor ()

Seduced 4,017 1,113 1 2.53

Assault 2,525 680 1 1.95

Electra 2,150 807 1 1.18

Entice 1,358 496 1 1.00

Anita 3,296 2,094 1 0.85

Daphne 2,383 1,394 1 0.32

Isis 1,042 646 3 0.00

Teri 1,100 762 3 0.00Stephanie 1,113 1,048 3 0.00

Gail 1,017 388 3 0.00

Calculating Risk Parameters:

PRODUCTION PLANNING(WITH MIN. ORDER QUANTITY)

Start n=1i=1 𝑄𝑖=max ¿ i=n? 𝑇=𝑠𝑢𝑚(𝑄𝑖) 𝑇 ≥10,000?

𝑖=𝑖+1

i=1

YES YES

NO

NO

end

After sorting the styles based on in decreasing order we have the following assumptions: n is the case of the first n styles of parka = min in case n

is the standard deviation of the style i

PRODUCTION PLANNING(WITH MIN. ORDER QUANTITY)

Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9 Case 10

1 600 1,248 2,107 2,303 2,472 3,062 3,417 3,417 3,417 3,417 2 600 1,125 1,244 1,348 1,708 1,925 1,925 1,925 1,925 3     600 742 865 1,293 1,550 1,550 1,550 1,550 4       600 919 2,029 2,696 2,696 2,696 2,696 5         600 1,339 1,783 1,783 1,783 1,783 6           600 758 758 758 758 7             600 600 600 600 8               600 600 600 9                 600 600 10                   600

Total: 600 1,848 3,831 4,890 6,204 10,032 12,729 13,329 13,929 14,529

Results from running the heuristic for all the cases:

OPERATIONAL RECOMMENDATIONS

What operational changes would you recommend to Wally to improve performance?

Cross Training Consider implementing the training policies you have in place in Hong Kong in China

Switching which Jackets are Produced in which warehouse Let the risk factor determine which jacket to produce in which location

Address your variability in your lead times for receiving materials Make an ordering Schedule

STRATEGIC OPTIONS How should Obermeyer management think (both short-

term and long-term) about sourcing in Hong Kong versus China?

Short Term: Let your risk factor determine where certain products should be produced

Long Term: (While working on your short term plan) Try to implement a cross training regime for your Chinese production center

References:

http://www.obermeyer.com/womens-ski-jackets

Thank You