COMPANY History:

1947: Klaus Obermeyer, a German immigrant began teaching at the Aspen Ski School

Skiing is a celebration of life

Klaus Obermeyer

COMPANY History:
1985: Obersport; a joint venture in Hong Kong, the company began to increase productivity to meet their new demands.

COMPANY Network:

Recently, a number of contractual ventures were added and a new complex in Lo Village Guangdong China

PRODUCT & Segmentation:

PRODUCT Variety:

SUPPLY CHAIN Process:

Textile and Raw Accessories Materials Suppliers

Apparel Manufactures

Obersport

Finished Retailers goods

The Obermeyer supply chain stretches from Asia to Aspen

PLANNING & Production Cycle:

Feb 92

Mar 92

May 92

Jul 92

Sep 92

Prototype, Sample Production

Design Process begins Las Vegas Concept Show Finalise Sketches sent Designs to Obersport Finalised

Nov 92 Full

Mar 93 scale

Apr 93 - Jul 93 production Additional orders received

Dec 93-Feb 94

Place 1st Production Las Vegas Order with Obersport Show

Replenishment orders received

PRODUCTION Process:
Asia
Fabric Producer Cut/Sew Factory

6 wk
Fabric Dyer

6 wk
Denver Warehouse Retailer

undyed greige goods Components Greige Shell Fabric Finishing of Shell Fabric (Dying & Printing) Finished Lining Fabric Insulation Zippers Thread Logo Patches, Drawcords, Hang Tags, etc. Snaps (undyed) Dyeing of Snaps

6 weeks

Consumer

Procurement lead time 45 90 days 45 60 days 45 60 days 2 3 weeks Standard (HK) 60 days, Custom (JP) 90+ days 30 days 15 30 days 1 2 months 15 30 days

ORDERING & SHIPMENT Process:

6 weeks

Factories in Hong Kong Order 20% in Apr-Jun 93

Seattle warehouse
Order 80% in Mar 93

Denver warehouse

Forecasts Product Sketches Forecast Committee Retailers order in Apr-Jun 93

800 Ski Retailers

SALES & REPLENISHING Process:

Aug 92

Sep 92

Oct 92

Nov 92

Dec 92
Sales

Feb 93

Peak Sales
Stock outs (+24 % of whole sale price)

Re-Sales

Market downs( -8% of wholesale price)

1. Using the sample data given in Table 3-19 , make a recommend for how many units of each style Wally should make during the initial phase of production. Assume that all of 10 styles in the sample problem are made in Hong Kong and that Wallys initial production commitment must be at least 10,000 units. Ignore price differences among styles in your initial analysis?

3. Repeat your methodology and assume now that all 10 styles are made in China. What is the difference (If any) between the two initial production commitments?

1. & 3. Comparison units of each style when produced in HK and China

Differences between production in HK and China

Inventory
Total Cost

Operation Time
Quality (% Repair)

1. & 3. The differences between production in HK and China

2. Can you come up a measure of risk associated with an your ordering policy? This measure should be quantifiable.

Whats the result if demand forecasting uncertainty?

-Stock outs (-24 % whole sale price) -Market downs( -8% of wholesale price) -(Old) designs -High inventory holding cost -Unable to fully profit from hit products

Why does risk happens ?

Forecasts are always uncertain

Standard deviation

Standard deviation

Demand Average

How can we assessing forecast certainty?

1 . Based on historical data - Past forecast error - Variability of demand

2. Rather than producing one joint forecast ,each member of the purchasing committee produces his/her own forecast .

Obermeyers Buying committee

3. The deviation in views is good estimator of forecast reliability

Table of standard deviation vs Coefficient of variation

4. How is this information helpful ?

Risk based production planning

- Using Early production Capacity (Speculative capacity) for Assoult and Seduced - Reserve later production Capacity (reactive capacity) for Daphne and Anita as demand become more apparent

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

KEY Problems:
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

OPERATIONAL Changes:
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.

Lead time reduction

Asia
Fabric Producer Cut/Sew Factory Denver Warehouse Fabric Dyer Retailer

undyed greige goods

Consumer Sport Obermeyer

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

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 Increasing bargaining power with suppliers by ordering via big supplier that can commit on timeline To collect stock raw materials which is base on Ski cloth production

OPERATIONAL Changes:
Increasing 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

Original distribution process

Seattle

Hong Kong

Establish Distribution Center in Seattle without through Denver

OPERATIONAL Changes:
Information system

Collect the data backward and analyze the demand of the show in Vegas and compare with actual purchase.
Expedition of data and information and utilize historical data / Committee forecasting / Research and Trend & Market Movement.

5. How should Wally think (both short term and long term) about sourcing in Hong Kong versus China? What kind of sourcing policy do you recommend?

Production Options
Hong Kong
Faster More flexible High / Reliable Quality

China
(Guangdong, Lo Village)

Lower labor cost Larger lot sizes

Concern
Smaller lot sizes Higher labor cost

Concern
Quality & Reliability Slower Less flexible

Where is better?
Short term Long term

Hong Kong

China

Thank you

Klaus Obermeyer