Sport Obermeyer

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Sport Obermeyer, Ltd.

General Background

Klaus Obermeyer emigrated from Germany to the United States in 1947 and started teaching at the Aspen Ski School. He was credited with making the first goose-down vest from a comforter in the 1950s. In 1992, estimated sales were $32.8 million with 45% share of children's skiwear market and 11% share of the adult skiwear market. It produced and sold parkas, vests, ski suits, shells, ski pants, sweaters, turtlenecks, and accessories. Parkas are the most critical design component of the collection. All other garments are fashioned to match the parkas' style and color.

Main Issues

Short Term-Forecasting (Supply and Demand)

• In November 1992, production quantities for each skiwear item offered in the line (1993-1994) are required. No indications about current 1992-1993 line available. Inaccurate forecasts of retailer demand are a problem. Production supply and customer demand differ. Forecasting becomes difficult with long production timelines (27 months). Cycle time reductions to be examined.

• Product variety and intense competition (Columbia Sportswear-23% of the adult ski-jacket market) make predictions difficult. Two scenarios 1) excess merchandise sold discounted below manufactured costs or 2) stock-outs and lost sales (production delays lead to lost sales as well) affecting return on investment for the companies (Obermeyer, Obersport and Alpine).

Sub Issues

• Disparate forecasts for 1993-1994 production and sales from management committee. Success depends on predicting market response to different styles and colours.

• Retailer feedback on 1993-1994 line won’t be until Las Vegas trade show in March 1993 after production. Waiting for market indicators delays delivery to retailers reducing exposure to products.

• Retailers want full delivery prior to start of season (early September ‘93)

Long Term-Production Decisions and Return on Investment

• Product allocation decision between factories in Hong Kong and China and determine how much of each product to make in each factory.

• Currently planning to produce half the parkas in China with production by subcontractors and starting production in a new plant in Lo Village, Guangdong.

• Oberymeyer and Obersport would like to maximize return on investment (new Alpine factory).

Environment and Root Case Analysis

Obermeyer Product Overview:

• Five genders: men's, women's, boys', girls', and preschoolers'. • Each market segmented by price, type of skier, and “personality” styles offered in several colors and sizes. • Targeted middle to high end of skiwear market.

• Over 85% of products sold to customers while skiing and focused on skiwear rather than skiing and casual “street wear”.

Current Forecasting Methods for Sport Obermeyer

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Sport Obermeyer is required to provide forecasting data for a 27 month period (long range) with minimal market indicators to provide reliability in forecasting. Currently using a time series method of forecasting for productions using one of the four or a combination of the following values: • Trend

• Seasonality
• Cycles
• Randomness

Forecasts often contain biases and these can be costly to the company. Skiwear is a seasonal fashion item and follows seasonal data set that management has been using to attempt to forecast production and demand values.

This is completed by the following:

• Compute the sample mean of the entire data set (using several seasons of data which is given in Exhibit 3 and 5 from the case study)....
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