Sport Obermeyer

Case Study

Sport Obermeyer

Session 6: Matching Supply and Demand and Cycle Time Reduction

Case Study: Sport Obermeyer

EXECUTIVE SUMMARY

Sport Obermeyer must make a decision on where to source production of their 1993-94 skiwear line well before feedback is even received from their previous year’s line. Obermeyer currently operates in an environment with a planning and production cycle of almost two years, greatly increasing the uncertainty in demand, thus making accurate forecasting extremely difficult.

By sourcing production in both Hong Kong and China, Obermeyer will gain the benefits of each location. China has low unit costs, while Hong Kong offers faster production times in smaller quantities. In order to achieve full cost advantage from sourcing in both locations, Sport Obermeyer must make further efforts to reduce processing times at each stage of their planning and production cycle.

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MAIN ISSUE

The main issue addressed in the following is where to source production of Sport Obermeyer’s 1993-94 skiwear line (Hong Kong or China). Additionally, a decision must be made on allocation of production numbers for each style of an initial order of 10,000 units from Hong Kong.

UNDERLYING AND ASSOCIATED ISSUES

One of Sport Obermeyer’s biggest challenges is forecasting demand. Each style is very hard to predict with inaccuracy in forecasting resulting in two scenarios; product not purchased by retailers ends up being sold at deep discounts with Obermeyer incurring the manufacturing costs, alternatively, not enough of the product has been produced to meet customer demand resulting in unattained revenue and lost demand that shifts to another product.

Labor costs in China are lower than those in Hong Kong; however concern lies in their quality and reliability of production.

Hong Kong workers produce about 50% faster than their Chinese counterparts and are typically trained in a broader range of tasks, a production line which requires 10 workers in...