Course Code: MKT418

Reebok NFL Replica Jerseys:

A case for postponement
Course Title: Supply Chain Management

Submitted To:
Saadia Shabnam Lecturer Department of Business Administration East West University

Submitted By:
Mahmuda Sharmeen Rahman Taslima Akther Sandy Francis Paris Evans Raphael Shaon Gomes Imtiaz mohammad Section : 01 Date of submission : 14th February 2011 ID: 2009-1-10-140 ID: 2008-3-14-009 ID: 2009-1-10-162 ID: 2009-1-10-121 ID: 2009-1-10-209

** Summarize the case for Reebok.

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Reebok the sports apparel company is the licensed manufacturer of NFL branded apparel line. Since year 2000 Reebok contracted with NFL and became their own manufacturer. Reeboks strength is they offer quality products and provide the market with the demanded item without increasing cost. The ready stock of blank jersey made it possible for them to supply market with immediate demanded provide consumers with hot market item before any of the competitor. The season of the NFL tournaments are held between September and January with only 16 regular session game per team. Replica jersey sales are highest in August/September as fans anticipate and prepare for the upcoming season. In the off season player switch their teams. Based on previous years performance Reebok tries to anticipate the existing market demand. They then places order to contract manufacturer to produce finished jersey and semi-finished blank jersey. Which are later used to print and label according to market demand. Reebok sources all jerseys from offshore contract manufacturers with a manufacturing lead-time of 30 days. These contract manufacturers are independent companies that accept production orders from Reebok and produce the finished goods. The manufacturers ship both completely finished goods, known as dressed jerseys, and blank jerseys (team finished jerseys that do not have the player name and number). Blank jerseys that are shipped from the contract manufacturers to the distribution center in Indianapolis will be completed at a Reebok owned screen printing facility, also located on-site in Indianapolis. The finishing facilities in Indianapolis consist of many sewing and screen-printing machines, capable of embroidering and printing to the highest commercial standards. The facility is used for screen-printing of NFL and NBA jerseys. Most player trades and free agent signings occur during the off season of February to April. Consumers react to these player movements by demanding the newest superstar jersey for their favorite team. Consumers purchase jerseys during the early part of the season in reaction to team and player performance. In 2003 the Kansas City Chiefs started the season with a series of wins, causing much excitement and increased demand for their jerseys. Christmas season drives a significant portion of sales, as jerseys are purchased and given as gifts. Reebok offers retailers an incentive discount to place early orders that result in retailers placing approximately 20% of annual orders for planned delivery in May. Reebok uses the advance order information to plan their purchases for the upcoming season. These pre-season orders provide Reebok with enough information to confidently plan purchase 2|Page

orders for several months. Retail orders placed between May and August are primarily to position inventory in the retail distribution centers to meet replenishment requirements from the retail outlets. Any orders placed after June are normally to replenish low stock or high demand items. Lead-time expectations at this point are 3 to 4 weeks. At the end of August, the start of the NFL season, 50% of sales have been shipped to retailers. Reebok places purchase orders on its contract manufacturers twice per month for the months of July, August, September, and October. All jerseys ordered during this time are typically for blank jerseys, with delivery planned for April. Only blank jerseys are ordered at this time, due to the uncertainty about the roster for the following season. Reebok expects the contract manufacturer will manufacturer the jerseys immediately and hold the blank jerseys in inventory. If Reebok requires the jerseys in the current year, then a request can be made to expedite those jerseys for immediate delivery. Thus reebok with the efficient use of their supply chain delivering unpredictable demanded items in market with shortest possible lead time.

** Given the uncertainty associated with player demand, what was the basic pattern of Reeboks supply chain?
The unpredictable nature of sports team apparel can cause A low inventory, having excessive dressed jerseys after the end of season. Players switching teams or changes in jersey design can also make the inventory of existing product useless and can cause demand for one teams jersey but having another teams jersey in warehouse in brief a total failure to meet the market demand. The market demand can be fulfilled later on by placing orders and acquiring new products in accordance with market demand. However, it could also mean a lower service level as it takes 4-8 weeks for jerseys to arrive at their warehouse. To avoid these uncertainties Reebok planned their supply chain. The supply chain for Reebok has two alternative routes.

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Fabric and raw materials for jerseys are procured and held in inventory by the contract manufactures (CM). Internal contracts are in place to ensure sufficient levels of raw materials inventory to provide capability to produce any team on demand, if required. The contract manufacturers cut, sew, and assemble a finished team jersey without a player name or number. This is called a team finished or blank jersey. The jersey then has two possible paths to reach finished goods inventory. For some orders, the CM will print the player name and number on the jersey before shipping to the distribution center. Blank jerseys are shipped directly to the distribution center with no player name or number. Reebok keep these jerseys in inventory until they start to see demand, then we will burn blanks to meet customer orders on time. Reebok also uses Blank jerseys during the offseason to meet immediate demand for star players that change teams through the various forms of player movement. For example when Warren Sapp signed with the Oakland Raiders in March (2004), retailers expected Reebok to start shipping his jersey immediately. Reebok cant wait three months to get jerseys from their suppliers; they had to start printing immediately. It is a good thing they had extra Raiders jerseys in stock. Only through the use of blank jerseys is Reebok able to provide product to the retailers in a timely manner. 4|Page

** How the strategy of postponement can help Reebok to have an efficient management of their different product line?
The term postponement refers to delayed decision-making about a product. It is beneficial to delay commitment to product-specific characteristics as late as possible in order to avoid a mismatch between orders and inventory on hand. The length of delay is specific to a product but the common strategic motivation is to gain better information about customer demand by waiting to customize a product for a particular market or customer. Postponement enables forecasters to make better predictions about end product demand over time. Postponement also creates opportunities to lower inventory costs due to risk pooling because goods are kept in unfinished or component form and can be used to assemble more than one type of finished good. The monetary value of an unfinished good is less because it is not committed to becoming a finished product and lacks the added value gained in final assembly. Reebok the sports apparel and footwear brand successfully uses and utilizes the postponement strategy to meet the demand of hot market items. Reebok delivers quality products according to customer demand. Reebok the licensed manufacture of NFLs sports apparel and footwear manufactures on field & replica jersey and sells them worldwide. This segment is a highly profitable but the demand of certain product is influenced by many uncontrollable factors such as team/individual performance. If any team outperforms in the field than the demand keeps increasing and if the team gets eliminated from the tournament the demand suddenly disappears. It is nearly impossible to forecast the actual future demand of any certain jersey due to the unpredictable performance in the field. To cope with this situation what Reebok does is they replenish their inventory once a week to meet customer demand. But the inventory items that are kept in retail stores has to come from supplier and the specification such as style and player name these are always variable and changes every now and then.

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So the supply chain of Reebok procures and holds fabric and raw material for jersey in inventory so that they can produce any team jersey on demand. The contract manufacturers cut, sew and assemble a finish team jersey without any player name or number. Then these blank jerseys are either printed by the contract manufacturer or it is supplied to the inventory of distribution centers and the labels are printed later on as demand starts showing. The blank CM and Reebok have a contract of minimum unit number of shipment so for finished goods. So the demand of jersey for players which is less frequently purchased are finished by Reebok and then the jerseys are supplied to retailers. These blank jerseys are also used to meet the increasing demand of star player jersey and once the players switch team. Then to meet the immediate demand of that particular jersey rebook uses its inventory of blank jersey and prints them to fulfill market demand. To meet the demand of hot market product such as if any certain player plays unexpectedly well in tournament then the demand of that particular number of jersey gets real high to meet the immediate demand Reebok uses their blank jersey and produces that particular jersey according to market demand. Thus Reebok operates with finished product and semifinished products and supply to the market with hot items just in time and in accordance with consumer demand. 6|Page