A Case for Postponement
"This time of year is a little too exciting/or us. I have a warehouse/nil of jerseys out there and retailers are Screaming for the teams and players I don't have! Every year, it seems like we have the right mix of inventory going into the season, and then some team that no one expected to do well gets off to a 4-0 start, and the team everyone expected to contend for the Super Bowl is losing games. Suddenly I have 1000s of jerseys 1 can't sell and 1000s of orders I can't fill."
Tony is responsible for the inventory of NFL replica jerseys that Reebok maintains in their central distribution center. It is early October, and the NFL season is well underway. "No wonder we call this the chase; I feel like I have been running for months; I'm exhausted. I wish there was some way to plan inventory that would allow me to react faster to hot players and teams. But with player demand changing so much from year to year, I really can't increase inventory; in fact I like to minimize inventory at year-end."
Reebok International Ltd. is headquartered in Canton, Mass. The company employs approximately 7,400 people, and is widely known for their sports apparel and footwear brands. Reebok was a small British shoe company in 1979, when Paul Fireman acquired the exclusive North American license to sell Reebok shoes.4 In 1985 Reebok USA acquired the original British Reebok, and Reebok International went public. Reebok in 2003 had total revenues of $3485 M and realized income from operations of $157 M. Paul Fireman continues to be the chairman and CEO.
In December 2000 Reebok signed a 10-year contract with the National Football League (NFL) that granted an exclusive license to Reebok to manufacture, market, and sell NFL licensed merchandise including on-field uniforms, sideline apparel, practice apparel, footwear, and an NFL-branded apparel line. The National Football League is the premier professional league for American football, consisting of 32 teams. Teams are organized in two conferences, the American Football Conference (AFC) and the National Football Conference (NFC), and in four divisions within each conference.
The history of American football traces back to 1869.5 The Arizona Cardinals are the oldest continuing operation in pro football, dating back to 1899. In 2003, the Super Bowl between the Tampa Bay Buccaneers and the Oakland Raiders received over 139M viewers, making it the most watched television program in history. From its humble beginnings, the NFL has grown into a very successful league.
Source: Copyright 2005, John C. W. Parsons. This case was prepared by John C. W. Parsons under the direction of Professor Stephen C. Graves as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The case is based on the author's MLog thesis, "Using a Newsvendor Model for Demand Planning of NFL Replica Jerseys" supervised by Professor Stephen C. Graves, June 2004.
LICENSED APPAREL BUSINESS
The Licensed Apparel Business is a high margin and lucrative business. In granting an exclusive license to Reebok, the NFL expects Reebok to provide a very high level of service to its customers, the sports retailers who ultimately sell to the public. However, demand is influenced by many uncontrollable factors and is extremely hard to predict; forecasting which items will sell is akin to forecasting who will be the Most Valuable Player in next year's Super Bowl.
Reebok has a history of delivering quality products. One retailer states, "The Reebok line is great. We're excited and anxious at the same time. [In the past] the fear was that one team jersey could be found from five different manufacturers at five different stores in the mall. Now the [question] is, will the consumer have to pay an extra $20 for a team...