Prepared by: Shaheen Sardar

SCM Lab. Department of Industrial and Management Engineering, Hanyang University, South Korea.

Case Study: Sport Obermeyer

Company History:

“Skiing is a celebration of life”Klaus Obermeyer

1947: Klaus Obermeyer, a German immigrant began teaching at the Aspen (U.S.) Ski School

Company History:

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

Women’s Collection

Competitors

The Jacobs Corporation

founded by David L. Jacobs Biography

Competitors

The North Face, Inc.

: subsidiary of VF Corporation

Competitors

Burton Snowboards

founded by Jake Burton Carpenter

Innovative Burton outerwear performance meetsleading Motorola Bluetooth ® technology

Sport Obermeyer• Sport Obermeyer – a high end fashion skiwear designer and

merchandising company• Commitment for producing line of fashion skiwear for 1993-94

Long lead times: Long lead times: It’s November 1992 and the company is starting to

make firm commitments for its 1993 – 1994 season. Based on experience, Intuition and sheer speculation No feedback from retailers (Las Vegas trade show in March 1993) Inaccurate forecasts of retailer demand

• Company’s inability to predict correctly (which product would become best seller) resulted in:

Excess merchandise and sold at deep discount Or company ran out of most popular items (lost sales)

Problem Statement

• How can Sport Obermeryer Ltd.:

Improve its forecasting method

Achieve a more dynamic manufacturing

capability in order to reduce final inventory

Increase profits

Become more competitive in the industry

Manufacturing Structure:

Sport Obermeyer Ltd.

Obersport Ltd.

Alpine Ltd• Hong Kong

• Macau• China

Lo Village

Other subcontractors

COMPANY NETWORK:

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

Product and Segmentation:

Product Variety:

Obermeyer Product

Fashion Ski Apparel

• Parkas, Vests, Sweater, ski suits, shells, ski pants, turtlenecks and

accessories

• Parkas : Most critical design

• Products offered in five different genders (Men, Women, Boys, Girls,

Preschoolers)

• Company segmented each gender market according to price,

type of skier and fashion forwardness.

• U.S. Skiwear estimated sales in 1992: US$ 32.8 million

• Obermeyer’s Share: • 45% of children skiwear mkt.

• 11% of adult skiwear mkt.

• Offering an excellent price/ value relationship to target group

Obermeyer Product

• Example (Adult man)– Fred (conservative, basic)– Rex (rich, latest fabrics and technologies)– Beige (mountaineering type skier, high technical performance)– Klausie (showy, latest fashions)

• Each Gender– Styles– Colors– Sizes

• Total Number of SKU’s (stock-keeping units): ~800• Deliver matching collections simultaneously• Deliver early in the season

The Supply Chain (Asia to Aspen (U.S.))• Obermeyer sourced most of its products through Obersport

• Obermeyer would contract with fabric supplier for specified amount of fabric

each month

• Lead time taken into account for all materials

• Most tasks performed only after production quantity planned by Obermeyer

• Obersport: Joint venture between Sport Obermeyer and its Hong Kong partner.

• Obersport is responsible for fabric and component sourcing for apparel

production and monitoring product quality at subcontractor factories.

Textile and Accessories Suppliers

Apparel

Manufactures

Obersport Retailers

The Supply ChainTextile and Accessories Suppliers

Apparel Manufacturers

Sport Obermeyer

Retailers

Obersport

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.

Product TransportationHong Kong Warehouse

Seattle

Obermeyer’s Denver Warehouse

then transported by trucks

goods produced in August were air-shipped

Retailers

orders were finally shipped via small-package carriers such as

UPS (United Parcel Service) at the end of August 1993

Cost $5 per parka

products made in June and July were transported by

ships

Retailers

Specialty Ski-Retail Stores

Department Stores

Direct Mail Retailers

Consumers

Most sales occur between September and January

Delivering products by early September

Sport Obermeyer

Production Options

• Hong Kong– More expensive– Smaller lot sizes– Faster– More flexible

• Mainland (Guangdong, Lo Village)

– Cheaper– Larger lot sizes– Slower– Less flexible

Obersport Limited

Obersport Ltd

• To coordinate production of sport obermeyer’s products in Far East

• Responsible for fabric and component sourcing

Joint Venture formed in 1985 by

• Klaus Obermeyer’s Son – Wally (Harvard Educated)

• Raymond Tse – Owner of Alpine- 80% order of Sport obermeyer

• Klaus entrusts Raymond Tse to make all decisions regarding production and investment

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

Feb 92 Mar 92 May 92 Jul 92 Sep 92

Nov 92 Mar 93 Apr 93 - Jul 93 Dec 93-Feb 94

Place 1st Production Las Vegas Additional Replenishment Order with Obersport Show orders received orders received

Prototype, Sample Production

Full scale production

Planning and Production Cycle:

The Effect of Minimum Order Quantities

• Ideally, during Speculative Production, we want to order a specific quantity of a parka style, and then, during Reactive Production, we want to “fine tune” the parka’s remaining supply by ordering as few or as many as the indicated by the revised forecast after Las Vegas.

• However, a large minimum order quantity for a particular style of parka forces us to order either many parkas or none.

• Thus, a minimum order quantity significantly reduces the ability to “fine tune” during Reactive Production.

Sport Obermeyer’s Time Lineand

“Speculative” versus “Reactive” Production

Feb … Oct Nov … Mar April … Aug Sept Oct Nov Dec Jan Feb Mar Apr1992 … 1992 1992 … 1993 1993 … 1993 1993 1993 1993 1993 1994 1994 1994 1994

Line. of 1993-94 Line

8 months

Productionof 1993-94 Line (peak selling in Dec & Jan)

"Reactive"Production

5 months9 months 5 months

"NOW" Initial

Forecast

In Feb 1994, start design of 1995-96 line.

Selling of

In Feb 1993, start design of 1994-95 line.

Las Vegas Revised Forecast 27 Months

1993-94 Line

Design of

1993-94

"Speculative"

“Speculative” Production “Reactive” Production

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

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

Asia6 weeks

Fabric Producer

Fabric Dyer Cut/Sew Factory

Denver Warehouse

Retailer

Un-dyed greige goods Consumer6 weeks

6 weeks

Production Process:

Factories in Hong Kong

Seattle warehouse

800 Ski RetailersProduct

SketchesForecast

Committee

Forecasts

Order 20% in Apr-Jun

93

Order 80% in Mar 93

Retailers order in

Apr-Jun 93

Denver warehouse

6 weeksOrdering and Shipment Process:

Sales and Replenishing Process:

Peak Sales

Aug 93 Sep 93 Oct 93 Nov 93 Dec 93 Feb 94

Sales

Re-Sales

Stock outs (+24 % of whole sale price)

Market downs (-8% of wholesale price)

Parkas

• Obermeyer produce 200,000

parkas every year

• Capacity: 3,60,000 each year

• Earn 24% of wholesale price

on each

• Unsold in season: sold at a

loss of 8%

• Profit of US$ 27 and loss of

US$9 on each parkas

• Buying committee forecasts

for 10 style of Parkas

Issue faced by Wally• How to make best use of forecasts by various members for

production commitment

• How to allocate production between factories at Hong Kong and China

• Last year 1/3rd Parkas was made in China.

• Company plan to produce 50% parkas in China as

labor cost in China is low

require larger minimum order

some concern of quality and reliability is there

Obermeyer Landed Cost:

Cost FOB Obersport $42.68

Agent’s fee (to Obersport, 7%) $2.98

Freight (Ocean Carrier) $1.40

Duty, insurance and miscellaneous $4.90

Total landed cost $51.92

Cost FOB Obersport:

Material $30.00

Labour $0.78

Transportation within China and China overhead

$2.00

China quota, obersport profit and overhead

$9.90

Total $42.68

ESTIMATED COST INFORMATION FOR ROCOCO PARKA (IF ASSEMBLED IN CHINA)

Parkas

• Wally studied the committee forecasts• Estimated the early production of each style• Demand and forecasts for last year analyzed• Standard deviation of demand was twice the standard

deviation of buying committee forecasts• Forecast distribution for each style as a normal random

variableWith mean equal to average of committee forecastsStandard deviation twice of committee forecasts

COMMITTEE FORECAST- 10 STYLES OF WOMEN’SPARKA – Individual Forecast

Style Price Laura Carolyn Greg Wendy Tom Wally

Gail $110 900 1,000 900 1,300 800 1,200

Isis $99 800 700 1,000 1,600 950 1,200

Entice $80 1,200 1,600 1,500 1,550 950 1,350

Assault $90 2,500 1,900 2,700 2,450 2,800 2,800

Teri $123 800 900 1,000 1,100 950 1,850

Electra $173 2,500 1,900 1,900 2,800 1,800 2,000

Stephanie $133 600 900 1,000 1,100 950 2,125

Seduced $73 4,600 4,300 3,900 4,000 4,300 3,000

Anita $93 4,400 3,300 3,500 1,500 4,200 2,875

Daphne $148 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

COMMITTEE FORECAST- 10 STYLES OF WOMEN’SPARKA – Individual Forecast

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

Parkas

• Wally also had to decide the location for production for each style ( Hong Kong or China)

• It was planned this year to produce 50% of products in China

• There was risk of managing production and inventory in longer term

• The larger minimum order size of China limits the capacity of company’s ability to increase the range of products

• China trade relationship with USA - Risky

Topic Hong Kong China

Hourly wage HK$30 RMB 0.91

Exchange rate HK$7.8 = US$1 RMB (Renminbi) 5.7 = US$1

Working hours 8 hours/day, 6 days/week

9 hours/day, 6.5 days/week

Total = 48 hours/week

Total = 58.5 hours/week

Maximum overtime allowed = 200 hours/years

During peak production periods, workers work 13 hours/day, 6.5 days/week

Weekly (non-peak output/worker)

19 parkas 12 parkas

COMPARISON OF OPERATIONS IN HONG KONG AND CHINA

Topic Hong Kong China

Actual labour content per parka (incl repair work)

-2.35 hours -3.6 hours

Paid labour time per parka (incl repair work)

-2.53 hours/parka -4.88 hours/parka

Labour cost /garment HK$75.6 RMB 4.45

Line configuration 10-12 people/line 40 people/line

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 Wage rate, WorkforceLow unemploymentYounger worker prefer office job

WorkforceLess quality and cleanliness conscious

Training requirements

COMPARISON OF OPERATIONS IN HONG KONG AND CHINA

Sport Obermeyer’s Relationship with Obersport

• In this global supply chain,

• Sport Obermeyer operates in the US and specializes in the demand side by coordinating activities such as• monitoring fashion trends,

• designing the parkas, and

• selling the parkas by entering into relationships with retailers.

• Obersport operates in Hong Kong and China and specializes in the supply side by coordinating activities such as• procuring fabric and components (e.g., zippers) and

• arranging for production using either independent subcontractors or factories of Alpine (a company owned by Obersport’s managing director).

Sport Obermeyer’s Relationship with Obersport (Continued)

• Global supply chains are frequently composed of different companies, with each company having a

• a different geographical location,

• a different knowledge set

• a different skill set, and/or

• a different set of business relationships.

• Sport Obermeyer should NOT eliminate its business relationship with Obersport. Instead, it should retain its relationship and seek to improve the coordination between Sport Obermeyer’s demand-side activities and Obersport’s supply-side activities.

SWOT Analysis

Strengths:• History of product innovation• Buying committee forecasts balance expectations• Experienced leadership and focused management team • Deliver products to retailers early in the selling season• Variety of SKUs, with color/size product diversity• Use of greige fabric delays product

differentiation

Weaknesses:• Excessively long lead times,

though this is the nature of the industry

• Minimum order quantity at Chinese manufacturers

• Leftover unpopular merchandise at end of selling period.

• Stock outs on most popular items during peak selling

Opportunities:• Aggressive marketing campaign• Expanding sales to European/

South American markets• Sponsorship of major winter

sports events

Threats:• Competition from value-

oriented sellers like Columbia.• Regulatory limits of goods that

can be imported into US.

Case Discussion Questions

1. Using the sample data given in Table 2-20, make a

recommendation for how many units of each style Wally

should make during the initial phase of production. Assume

that all of the 10 styles in the sample problem are made in

Hong Kong and that Wally’s initial production commitment

must be at least 10,000 units. Ignore price differences among

styles in your initial analysis.

2. Can you come up with a measure of risk associated with your

ordering policy? This measure should be quantifiable.

Case Discussion Questions

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?

4. What operational changes would you recommend to Wally to

improve performance?

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?

Solving Wally’s Sample Problem (with k=0)

Too much!

D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S

k = 0 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0

S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D

S T Y L EG a i l 1 0 1 7 3 8 8 1 0 1 7I s i s 1 0 4 2 6 4 6 1 0 4 2

E n t i c e 1 3 5 8 4 9 6 1 3 5 8A s s a u l t 2 5 2 5 6 8 0 2 5 2 5

T e r i 1 1 0 0 7 6 2 1 1 0 0E l e c t r a 2 1 5 0 8 0 7 2 1 5 0

S t e p h a n i e 1 1 1 3 1 0 4 8 1 1 1 3S e d u c e d 4 0 1 7 1 1 1 3 4 0 1 7

A n i t a 3 2 9 6 2 0 9 4 3 2 9 6D a p h n e 2 3 8 3 1 3 9 4 2 3 8 3

S u m - - - > 2 0 , 0 0 1 2 0 , 0 0 1 < - - - S u m

),0( kMax

Solving Wally’s Sample Problem (with k=2)

D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S

k = 2 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0

S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D

S T Y L EG a i l 1 0 1 7 3 8 8 2 4 1I s i s 1 0 4 2 6 4 6 0

E n t i c e 1 3 5 8 4 9 6 3 6 6A s s a u l t 2 5 2 5 6 8 0 1 1 6 5

T e r i 1 1 0 0 7 6 2 0E l e c t r a 2 1 5 0 8 0 7 5 3 6

S t e p h a n i e 1 1 1 3 1 0 4 8 0S e d u c e d 4 0 1 7 1 1 1 3 1 7 9 1

A n i t a 3 2 9 6 2 0 9 4 0D a p h n e 2 3 8 3 1 3 9 4 0

S u m - - - > 2 0 , 0 0 1 4 , 0 9 9 < - - - S u m

),0( kMax

Too little!

Solving Wally’s Sample Problem (with k=1)D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S

k = 1 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0

S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D

S T Y L EG a i l 1 0 1 7 3 8 8 6 2 9I s i s 1 0 4 2 6 4 6 3 9 6

E n t i c e 1 3 5 8 4 9 6 8 6 2A s s a u l t 2 5 2 5 6 8 0 1 8 4 5

T e r i 1 1 0 0 7 6 2 3 3 8E l e c t r a 2 1 5 0 8 0 7 1 3 4 3

S t e p h a n i e 1 1 1 3 1 0 4 8 6 5S e d u c e d 4 0 1 7 1 1 1 3 2 9 0 4

A n i t a 3 2 9 6 2 0 9 4 1 2 0 2D a p h n e 2 3 8 3 1 3 9 4 9 8 9

S u m - - - > 2 0 , 0 0 1 1 0 , 5 7 3 < - - - S u m

),0( kMax

Too much!

Solving Wally’s Sample Problem (with k=1.0608)

D E T E R M I N I N G S P E C U L A T I V E P R O D U C T I O N Q U A N T I T I E S

k = 1 . 0 6 0 8 < - - - F i n d v a l u e o f k t h a t m a k e s l a s t c o l u m n s u m t o a b o u t 1 0 , 0 0 0

S T A N D A R D F I R S T - P E R I O DM E A N O F D E V I A T I O N P R O D U C T I O N Q U A N T I T YD E M A N D O F D E M A N D

S T Y L EG a i l 1 0 1 7 3 8 8 6 0 5I s i s 1 0 4 2 6 4 6 3 5 7

E n t i c e 1 3 5 8 4 9 6 8 3 2A s s a u l t 2 5 2 5 6 8 0 1 8 0 4

T e r i 1 1 0 0 7 6 2 2 9 2E l e c t r a 2 1 5 0 8 0 7 1 2 9 4

S t e p h a n i e 1 1 1 3 1 0 4 8 1S e d u c e d 4 0 1 7 1 1 1 3 2 8 3 6

A n i t a 3 2 9 6 2 0 9 4 1 0 7 5D a p h n e 2 3 8 3 1 3 9 4 9 0 4

S u m - - - > 2 0 , 0 0 1 1 0 , 0 0 0 < - - - S u m

),0( kMax

Just right!

Question 1. and 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)

Question 1. and 3. The differences between

production in HK and China

Question 1 (Alternative approach)

• We have three types of products:-Low risk: risk % between 0 and 40-Medium risk: risk % between 41 and 59-High risk: risk % above 60

• To minimize the risk, we decided to order the following quantity:-Low risk items: 75% of the average forecast-Medium risk items: 50% of the average forecast-High risk items: 25% of the average forecast

Question 1 (Alternative approach)

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

-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

What’s the result if there is demand forecasting uncertainty?

Forecasts are always uncertain

Why does risk happen?

Demand Average

Standard deviation

Standard deviation

How we assessforecast 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 .

Obermeyer’s Buying committee

3. The deviation in views (of Buying committee) is good estimator of forecast reliability

Table of standard deviation vs. Coefficient of variation

C.V. = Standard Deviation / Mean

4. How is this information helpful?

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

“Risk –based production planning”

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

• 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

KEY Problems:

• 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 can’t predict fashion colors

Fabric Producer

Fabric Dyer Cut/Sew Factory

Denver Warehouse

Retailer

undyed greige goodsSport 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

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

OPERATIONAL Changes:

•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:

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– Better for higher

risk designs

• Concern– Smaller lot sizes– Higher labor cost

• China (Guangdong, Lo Village)

– Lower labor cost– Larger lot sizes– Better for lower risk

designs

• Concern– Quality & Reliability– Slower– Less flexible

Where is better?

Short term Long term

Hong Kong China

Recommendations to Wally

RECOMMENDATION #1. Improve the demand forecasts made

internally by the Buying Committee in November (1992) just

before Speculative Production.

Instead of using just a simple average of the individual forecasts

made by Laura, Carolyn, Greg, Wendy, Tom and Wally use a

weighted average, with the weights reflecting past accuracy.

Recommendations to Wally(continued)

RECOMMENDATION #2. Obtain market feedback earlier than Las Vegas, thereby converting some Speculative Production to Reactive Production.

Sport Obermeyer can invite selected retailers to come in January to Aspen for an all-expenses-paid “Early Order Weekend”, where there is time for a “sneak preview” of the new line, some recreational skiing and socializing, and then the early placement of orders at a discount.

To maximize the value of the market feedback, Sport Obermeyer’s “guest list” should include both large and small retailers and both urban and resort retailers.

Recommendations to Wally(continued)

RECOMMENDATION #3. Decrease lead times for both raw materials and finished goods, thereby allowing more time to utilize existing capacity.

Since the business strategy should emphasize Dependability more than Cost, lead-times can be reduced using some or all of the following methods:•Choose suppliers of raw materials more on the basis of D than C.•Speed up orders through information sharing with suppliers.•Speed up shipments using faster (but more expensive) shippers.•Establish some local (but more expensive) production capacity for “last minute” production.

RECOMMENDATION #3 (continued)

Other ways to reduce lead times include:

From the items with long lead times, increase the amount of

“safety stock” inventory for those items that are inexpensive

(e.g., buttons) and/or shared by many parkas (e.g., black fabric).

Simplify the parkas’ designs so that they can share as many

components as possible. For example, are 100,000 varieties of

zippers really necessary?

Recommendations to Wally(continued)

Recommendations to Wally(continued)

RECOMMENDATION #4. Increase production capacity by:

• Using more subcontractors,

• Using more overtime in China, and/or

• Exploring an alliance with a swimwear manufacturer who can “supply” excess capacity when Sport Obermeyer needs it and “consume” capacity when Sport Obermeyer has excess capacity.

Recommendations to Wally(continued)

RECOMMENDATION #5. Decrease minimum order quantities,

thereby improving the ability to “fine tune” during Reactive

Production.

Minimum order quantities occur because there are long “set-up

times” when switching from the production of one style of parka

to another, thereby making it uneconomical to have “short runs”.

Recommendations to Wally(continued)

Sport Obermeyer can decrease the minimum order quantities by providing incentives to its suppliers to have more flexible production lines.

This increased flexibility can come from:

Improved process design (e.g., a cellular production system).

Improved equipment (e.g., more flexible cutting machines).

RECOMMENDATION #5 (continued)

Thank You