Sport Obermeyer Case Study

CASE STUDY

Sport Obermeyer, Ltd.

Situation

Sports Obermeyer, Ltd. is a fashion skiwear manufacturer that produces broad line of stylish ski apparel with innovative design and features. The company competes on price/value relationship targeting the middle to high end of the ski market. With the growth of the market in recent years, it has been increasingly challenging to predict the demand, worker levels and productivity levels. This resulted in inability to accurately forecast market sales which caused surplus of inventory of certain products while selling out in others - not maximizing revenue from the existing potential market. In addition, the inflexibility of production capabilities by its sole supplier, Obersport, made it difficult for the production to meet the demands of the market. Vice President Willy Obermeyer has to address these issues by improving on the forecasting model, allocating orders accordingly to the capabilities of the factories, and eliminating deficiencies in acquirement of raw materials.

Issues

Sports Obermeyer, Ltd. has been experiencing the following issues:

1. The company faces excess inventory of unpopular products and sell-out of popular products. The flawed demand predictions lead to inefficient production amounts.

2. The coordination of production between the two factories has difficulties meeting the demand of the market due to differences in capacities and labour costs.

3. The company has to compete on speed for order quantities to be shipped overseas to Obermeyer warehouses due to quota restrictions that are imposed by the U.S. government.

Analysis

Refer to attached exhibits 1 to 3.

Results

Exhibit 1 shows a chart of the sample buying committee's forecasts for 10 styles of women's parkas. From observing the mean and the standard deviation, the standard error can be calculated to find out more accurate estimation of the whole population rather than the sample taken by the buying committee.

Exhibit 2 shows the comparison of operational capabilities between the two facilities of Obersport. Both factories have advantages of one another in some aspects. In general, it should be noted that the Hong Kong factory excels in quality of production whereas China factory exceeds in quantity of production.

Exhibit 3 shows the procurement lead time for parka components. These are generic raw materials that are required almost universally amongst Obermeyer products. Although variations may exist, many of these components are interchangeable and compatible with other products. Looking at the procurement lead times, all of the components that are outsourced and can take up to 90 days. Better planning of component handling may save up three months of production time.

Recommendations

Adopt a new forecasting model - Development of a new forecasting model based upon previous sales records and sale trends, the company may distribute their production efforts more accurately. The annual Las Vegas trade show is where Obermeyer makes 80% of the yearly volume by contracting with retailers. The current forecasting method is capable of accurately estimating the total demand of the product after this order

Allocation of production - Each of the two manufacturing facilities of Obersport has their own pros and cons in terms of production speed, quality of products and cost of labour. By observing the results, it is clear that Hong Kong factory should be utilized in making