Sport Obermeyer

Executive Summary

Sport Obermeyer, Ltd. was founded by Klaus Obermeyer to provide U.S. skiers with the same protective and stylish clothing and equipment available in Germany. Over the years, Sport Obermeyer developed into a preeminent competitor in the U.S. skiwear market: estimated sales in 1992 were $32.8 million. The company held a commanding 45% share of the children’s skiwear market and 11% share of the adult skiwear market.

Obermeyer offers a broad line of fashion ski apparel, including parkas, vests, ski suits, shells, ski pants, sweaters, turtlenecks, and accessories. Parkas are considered the most critical design component of a collection; the other garments were fashioned to match the parkas’ style and color. Their products were offered in five different genders: men’s, women’s, boys’, girls’, and preschoolers’. The company segments each “gender” market according to price, type of skier, and how “fashion-forward” the market was. Within each “gender”, numerous styles are offered, each in several colors and a range of sizes.

In 1985, Klaus Obermeyer teamed up with Raymond Tse to establish Obersport Ltd. This joint venture was used to coordinate production of Sport Obermeyer products in the Far East. Obersport was responsible for fabric and component sourcing for Sport Obermeyer’s production. Materials sourced were cut and sewn either in Raymond Tse’s own “Alpine” factories or in independent subcontractors located in Hong Kong, Macau, and China. Raymond was owner and president of Alpine Ltd., which included skiwear manufacturing plants in Hong Kong as well as a recently established facility in China. Sport Obermeyer’s orders represented about 80% of Alpine’s annual production volume.

The production process for Sport-Obermeyer’s apparel begins a full year and a half before the apparel actually hits the market. They use a multi-phase production process. The first production order is received by Obersport from Sport-Obermeyer in February. The second production phase begins in April or May of the same year and continues up until August.

Having a multi-phase production process has advantages and disadvantages. For Sport-Obermeyer, this multi-phase process helps them to produce 200,000 parkas a year. Obermeyer takes advantage of the multi-phases by producing certain products during the initial phase and other products during the second phase. This allows them to meet their ever changing demand efficiently.

The two facilities used by Obersport located in Hong Kong and China have a number of differences. The cost to produce products in China is drastically lower than the costs to produce in Hong Kong. But the quality of the products produced in China is drastically lower then those produced in Honk Kong. Obersport uses both of these facilities during the production process to help ensure that the products will arrive to retails before the beginning of retail season.

Concerns

An immediate concern was to determine an appropriate production commitment for the first half of Obermeyer’s projected demand for the 1993-1994 season. They also need to decide where to produce the 10,000 units for the first phase of production. And to complete the planning decisions, they will have to decide which styles to make in Hong Kong and which would be better to produce in China. This year, Obermeyer expected to produce about half of all its products in China.

After conducting our analysis, we have determined that the initial production order should consist of the products that have the smallest percentage variation from the mean (standard deviation in terms of percentage). We feel that if the percent variation is small then there is less chance of being incorrect in our forecasting.

To improve the global supply chain performance, we recommend that Obermeyer use efficient supply chain for products that have lower demand uncertainty and low supply uncertainty. This supply chain uses strategies developed to create the highest cost efficiency. Also, they should use responsive supply chain for products that have higher demand uncertainty and low supply uncertainty. This supply chain uses strategies that increase responsiveness and flexibility to changes in customer demand. Specifically, for the responsive supply chain, we suggest the use of Postponement strategies.

Additionally, we recommend that Obermeyer reduce the number of suppliers and get materials from suppliers geographically closer to the company’s production facilities, reduce setup lead time and costs by investing in better technology and provide extensive training to workers. This is especially important in