Case Analysis: Sport Obermeyer

Name: Matthew James (U1220885G)

1. Company Background
Sport Obermeyer was founded by Klaus Obermeyer in 1947. He was
surprised to learn that the students that he was teaching at Aspen ski
school in Colorado were wearing ski wears that do not sufficiently protect
them against the cold weather. As a result, Obermeyer decided to provide
protective and stylish clothing and equipment, on par with those worn in
Germany, his home country. Sport Obermeyer eventually developed into
a formidable competitor in the U.S. skiwear market.
Based out in Aspen, the new company offers 5 distinct categories of
products, namely mens, womens, boys, girls as well as preschooler.
Some of the products that the company carries include: parkas, vests, ski
suits, shells, ski pants, sweaters, turtlenecks, as well as some stylish
accessories.
2. Organizational Structure
Interestingly, there are two school of thoughts on management within
Sport Obermeyer. Klaus Obermeyer believed that his role was to provide
value to his customers. He strongly believed in his personal intuitive and
industrial experience, and often relied on it in making business judgment.
On the other hand, his son, Wally Obermeyer was far more objective.
Wally believed that decisions should always be made based on intensive
data gathering, followed by statistical analysis.
3. Order Cycle
Sport Obermeyer follows an order cycle that looks like this,
D esign
Process

Sam ple
Production

Raw
M aterial
sourcing
and
production

Retail
ordering
process

Shipm ent
to
O berm eyer
w arehouse

Shipm ent
to retail

4. Supply Chain
The value chain for Sport Obermeyer can be summarized as the following:
Textile and
Accessories
Suppliers
Raw
Materials :
Produce ,
dye/print
fabrics
Zipper
(from YKK),
fasterner
and labels

Apperal
Manufacturer
s
Cut and
Sew
Example :
Alpine

Obersport
Production
Planning
Operation
Manageme
nt
Quality
Control

Sport
Obermeyer
Forecasting
sales
Product
design
Ship to
retailers

Retailers
Customers
Market
Feedback

5. Challenges faced by Sport Obermeyer

Based on the case, Obermeyer was presented with several obstacles in
their business operations. Here is an overview of the challenges they were
facing.
5.1. Inaccurate Forecasting
The company faced the problem of overstocked and understocked as a
result of inaccurate forecasting. As a result, they either had a severe
shortage of popular items (which translates to missed opportunities to
fulfill demand and realize income), or a severe excess of unsold goods
(in which they had to sell it at a deep discount, which led to heavy
losses).
It was challenging to make critical decisions based on market trend as
the company faced road blocks in obtaining formal data regarding
trend in a timely manner. When Sport Obermeyer finally got it hands
on the retailer feedbacks during the Vegas fashion week, it was
already too late to change much of the production which would have
been set off.
Wally Obermeyer attempted to get a buying committee to submit
individual assessment and forecast for each Obermeyer product.
Evidently, Wally was trying to obtain a more objective forecasting by
eliminating group thinking within the committee. However, the reports
submitted to Wally were highly conflicting and inconclusive.

5.2. Manufacturing Location

After deciding the amount of apparels to produce, Sport Obermeyer
has to decide where to produce them. As Obermeyer was deciding to
increase the number of produce to half of all its Parkas in China,
Obermeyer has to look for other options. The company was faced with
three distinct option for production channel: (i) Subcontractors in
China, (ii) Alpine Ltd, Hong Kong, and finally (iii) Alpine Ltd,
Guangdong. There are several factors that Obermeyer was considering
i)
Skill level of workers
Workers in Hong Kong were about 50% faster than workers in
China. Furthermore, they were better trained, which meant that
they can perform a much wider variety of operations
ii)

Output over a given amount of time

Workers in Hong Kong were able to produce twice as much as
the workers in China. That being said, it was also important to
note that Hong Kong workers were subjected to only 200
hours/year of overtime. On the other hand, Chinese workers can
work up to 13 hours for 6.5 days a week.

iii)

Labour Cost
The labour cost of Chinese workers (US$ 0.16/hour) was
significantly lower than the labour cost of workers from Hong
Kong (US$ 3.84/ hour).

iv)

Minimum order quantities and quota restrictions

Hong Kong factory has a lower minimum order quantity as
compared to the Chinese factory. For example, the minimum
order of parkas is 600 units and 1200 units respectively.
There was a tight quota restriction on number of products
imported from China to US. As a result, many companies often
rush to get their products into the country using expensive air
freighting services before the quota is filled. On the other hand,

Obermeyer do not have to worry about such problem in Hong

v)

Kong.
Quality Control
Quality of products from Hong Kong (1-2% of damaged goods)
was significantly better than that from China (10% of damaged
goods).

5.3.

Competition

Sport Obermeyer is specialized in skiwear company as evidenced by

their sales a whooping 85% sales derived directly from ski-related
products. However, they faced strong competition from Columbia
Sportswear whose ski-products were much cheaper. As a result,
Columbia Sportswear managed to capture 23% of the adult market, as
compared to only Sport Obermeyers 11%. Despite Columbias slow
entry into the field, they were already making huge steps that could be
detrimental to Sport Obermeyers market position.

6. Suggestion for Obermeyer

Suggestion 1: Improvement on the current forecasting system
This is assuming that there are no other fast ways to improve the current
ecosystem in order to obtain high quality and timely information for
proper forecasting. It is suggested that certain improvements to be made
so that Wally can better assess the individual market forecasting reports
by the buying committee. For example, Wally can consider using a
weighted average of the committees individual forecasts, according to
how accurate each individuals prediction has been in the past. Of course,
this is only a short term solution for Wally to buy time so that he can work
on other solving other challenges to improve the information flow.
Suggestion 2: Production Planning

As Alpines head, Raymond Tse wass venturing into GuangDong, China,

Sport Obermeyer could work closely with him to train the workers in
China. Hopefully, with substantial training, the production rate and quality
would be on par with those form Hong Kong, but at a significantly lower
cost.
Suggestion 3: Obtaining better information
As the timeliness of information is crucial to the accuracy of forecasting,
Wally should focus his effort on streamlining his value chain. If capital
allows, Sport Obermeyer may want to consider forward integrating with
his retailers. As such, real time information on sales and inventory of each
product at each geographical location can be obtained. As a result, Sport
Obermeyer can focus on producing the right amount of goods to meet the
demand. On other hand, it is also possible to consider backward
integration with their designers as well as manufacturers so as to reduce
lag time.
Suggestion 4: Fast Fashion
Assuming that Obermeyer has successfully streamlined their operation to
produce goods at an efficient and timely manner, Obermeyer should focus
on competing with Columbia Sportswear for market share. In order to
compete with Columbia Sportswear which is significantly cheaper,
Obermeyer would probably need to launch a new product line that
competes at that price level.
Obermeyer could attempt to venture into the fast fashion industry. By
paying close observation to design trend and to consumers, by making
rapid and instinctive product design decisions, and being able to create
and place products in store fast, would be a key competitive advantage to
compete about Columbia Sportswear. Of course, fast fashion is only
attainable if Obermeyer managed to streamlined its supply chain.

7. Conclusion
Obermeyer faced challenges in terms of forecasting, production planning
and competition. Wally should find a quick fix to assess the accuracy of
forecasting report (Suggestion 1 weighted average) , while he devotes
his time to improves the timeliness of information (Suggestion 3- Value
chain integration).

Also, he could consider working with Alpine to train

their workers as well as venturing into the fast fashion industry to combat
the fast-rising Columbia Sportswear.