Presented By: GROUP 6

Abhijeet Kumar 13PGP001

Akshay Sharma 13PGP008
Kaiwalya Misra 13PGP025
Hemant Nagalkar 13PGP033
Sharad Kumar 13PGP052
CONTENTS
1
Introduction to Obermeyer
2
Case Facts
3
Order Cycle
4
The Supply Chain
5
Production Planning
6
Question 1: Order placement Dilemma
7
Question 2: Recommended Operational Changes
8
Question 3: Short Term and Long Term Sourcing
9
Conclusion
Origins traced to 1947.
Over years, Prominent competitor in US skiwear market.
1992: 45% share in Children skiwear and 11% share in adult
skiwear market.
1992: estimated sales $32.8 Million.
Product Line: Parkas, vests, ski suits, shells, ski pants,
sweaters, turtle necks, and accessories.
Mens, Womens, Boys, Girls and Preschoolers.


INTRODUCTION
Excellent Price/Value relationship.
Value is defined as both functionality and style.
Target Market: Middle to High End of skiwear market.
BRAND HIGHLIGHT
MANUFACTURING STRUCTURE
SPORT OBERMEYER LTD.
OBERSPORT LTD.
ALPINE LTD. OTHER
SUBCONTRACTOR
Hong Kong
Macau
China
Lo Village, China
Hong Kong
THE SUPPLY CHAIN
Textiles &
accessories suppliers
Apparel
Manufacturers
Obersport
Sport
Obermeyer
Retailers
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.
ORDER CYCLE
The Design Process
Sample Production
Raw material sourcing
& production
Retail ordering process
Shipment to
Obermeyer warehouse
Shipment to Retail
PLANNING & PRODUCTION
CYCLE
FEBRUARY
92
MAY
92
JULY
92
SEPTEMBER
92
DEC- FEB
94
APRIL-JULY
93
MARCH
93
NOVEMBER
92
Design
Process
Concept
Finalization
Sketches sent
to Obersport
Designs
Finalized
Place 1
st

production
Order
LAS VEGAS
SHOW
Additional
Orders placed
Replenishment
Order received
Inaccurate Forecast Mechanism:
In Nov 1992 the company has to place 1
st
order with suppliers for
93-94 sales.
Based on intuition, experience and sheer speculation.
Las Vegas trade show is scheduled in March93.

After Effects:
Excess merchandise and had to be sold at deep discounts.
Inability to provide the most popular items during the season
resulting for loss of sales.

Production Location Dilemma : China or Hong Kong

PROBLEMS
Using the sample data given in Exhibit 10, make a
recommendation for how many units of each style Wally
Obermeyer should order during the initial phase of
production.
Assume: that all ten styles in the sample problem are
made in Hong Kong, and that Obermeyer's initial
production commitment must be at least 10,000 units.
(Ignore price differences among styles in your initial
analysis).
PROBLEM STATEMENT 1
EXHIBIT 10
INDIVIDUAL FORECAST
Style Laura Carolyn Greg Wendy Tom Wally
Gail 900 1,000 900 1,300 800 1,200
Isis 800 700 1,000 1,600 950 1,200
Entice 1,200 1,600 1,500 1,550 950 1,350
Assault 2,500 1,900 2,700 2,450 2,800 2,800
Teri 800 900 1,000 1,100 950 1,850
Electra 2,500 1,900 1,900 2,800 1,800 2,000
Stephanie 600 900 1,000 1,100 950 2,125
Seduced 4,600 4,300 3,900 4,000 4,300 3,000
Anita 4,400 3,300 3,500 1,500 4,200 2,875
Daphne 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
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

DETERMINING SPECULATIVE
QUANTITY
Style
Average Forecast
()
Standard
Deviation()
Production
Quantity
(-k)
Gail 1,017 388 629
Isis 1,042 646 396
Entice 1,358 496 862
Assault 2,525 680 1,845
Teri 1,100 762 338
Electra 2,150 807 1,343
Stephanie 1,113 1,048 65
Seduced 4,017 1,113 2,904
Anita 3,296 2,094 1,202
Daphne 2,383 1,349 1,034
Totals 20,000 10,618
Using k=1
Style
Average Forecast
()
Standard
Deviation()
Production
Quantity
(-k)
Gail 1,017 388 241
Isis 1,042 646 0
Entice 1,358 496 366
Assault 2,525 680 1,165
Teri 1,100 762 0
Electra 2,150 807 536
Stephanie 1,113 1,048 0
Seduced 4,017 1,113 1,791
Anita 3,296 2,094 0
Daphne 2,383 1,349 0
Totals 20,000 4,099
DETERMINING SPECULATIVE
QUANTITY
Using k=2
Since using K=1 gives an estimation of final quantity of
10,618 which is close to our requirements of at least
10,000 we will use this data for placing the production
orders.


CONCLUSION
Gail
Isis
Entice
Assault
Teri
Electra
Stephanie
Seduced
Anita
Daphne
629
396
862
1,845
338
1,343
65
2,904
1,202
1,034
What Operational changes would you recommend to
Wally to improve performance?
PROBLEM STATEMENT 2
Company operations:
Majorly Innovative Products
95%New products yearly
200 demand error
High market mediation
Need speed & flexibility

Company Operations:

Key Challenges:
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
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 cant predict fashion colors.
Fabric
Producer
Fabric
Dyer
Cut/Sew
Factory
Denver
Warehouse
Retailer
undyed greige
goods
Sport 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


OPERATIONAL Changes:
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


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:
How should Obermeyer management think (both
short-term and long-term) about sourcing in Honk
Kong versus China?
PROBLEM STATEMENT 3
TOPIC HONG KONG CHINA
Hourly wage HK$30

[ HK$7.8 = US$1 ]
RMB 0.91

[RMB 5.7 = US$1 ]
Hourly wage
Comparison
(In US $)
30/7.8= US$ 3.84

~ 25 times more than
the Chinese rate
0.91/5.7 = US$ 0.15
Working hours 8 hours/day,
6 days/week

Total : 48 hrs/week
9 hours/day,
6.5 days/week

Total = 58.5 hrs/week
Weekly
(output/worker)
19 parkas 12 parkas
Labor cost /
Garment
HK$ 75.6
= 75.6/7.8 = US$ 3.69

~ 5 times more than
the Chinese rate
RMB 4.45

= 4.45/5.7 = US$ 0.78
TOPIC HONG KONG CHINA
Line
configuration
10-12 people/line

12 x 3.84 = US$ 46

~ 7.5 times more than
the Chinese rate
40 people/line

40 X 0.15 = US$ 6
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 1. Wage Rate (very high)
2. Workforce

[ Low unemployment (~2%) ,
Younger workers prefer office
jobs ]


Workforce

[ Less quality and cleanliness
conscious,
Training requirement ]
Hong Kong
Benefits
Faster production
More flexible
High Quality
Less repair rate (1-2%)
Better for higher risk
designs

Concerns
Smaller lot sizes
Higher labor cost

CHINA (guangdong)
Benefits
Lower labor cost
Larger lot sizes
Better for lower risk
designs

Concerns
Quality
High repair rate /
Reliability issue
Slower production rate
Less flexible

Smaller minimum quantities in Hong Kong yield higher
returns even though the unit cost is higher

In China , minimum order quantity is higher, extra need
to paid even if small quantity is required.

Extra Products less likely to be sold.

China should be targeted only if the quantity is higher.

It may consume the import quota if produced more and
then imported more.

ANALYSIS
Recommendation
HONG KONG


Short Term Sourcing


CHINA

Long Term Sourcing

Short Term (only if
quantity is higher)
THANK YOU