Sport Obermeyer, Ltd was created around 1947 by Klaus Obermeyer. While teaching at an Aspen Ski School, Klaus noticed a difference between the clothing that his students wore and the clothing skiers wore in his native Germany. Although Klaus started out by traveling to Germany to find high-performance skiwear that was suitable for his students, he designed his own line of skiwear and ski equipment products and that was how Sport Obermeyer, Ltd was introduced. Sport Obermeyer developed into one of the top competitors in the U.S. skiwear market, commanding a 45% share of the children’s skiwear market and 11% share of the adult market in 1992. The core competencies of Sport Obermeyer would be functionality and style. The functionality has to deal with the quality of their clothes. Sport Obermeyer has achieved their style through innovation. This is how the company competes in the skiwear market, by offering a strong price/value relationship and value consisting of the functionality and style of their product. Their products offered key elements that serious skiers wanted, such as products that were warm, water-proof and without constraint. While competitors offered outerwear for both skiing and casual wear, Obermeyer sold most of its products to customers for use while skiing. Obermeyer offered a variety of fashion ski apparel and based each “gender” market according to price, type of skier and the fashion forwardness of the market. Obermeyer faced two major problems in this case. Due to increasing product variety and intense competition, Obermeyer was unable to make accurate predictions of what retailers demanded. This left Obermeyer with excess merchandise that had to be sold at discounts that were considerable below manufactured cost and a shortage on their most popular products. The second problem that Obermeyer faced was which products to produce in Hong Kong and which to produce in China. While labor costs were cheaper in China, the quality and reliability of Chinese operations were in question. China was also subject to stringent quota restrictions by the U.S. and their plants required larger minimum order quantities.
1. Chinese production
i. Labor cost: per garment (including repair work) at prevailing exchange rates Hong Kong US$9.69 versus China US$0.78 ii. Quality: Obersport monitors production and quality at all subcontractor factories including inspecting random pieces from each subcontractor’s production prior to shipping to the United States iii. Import quotas: result in increased transportation costs for goods produced in China; however, delivered cost is still less than for goods manufactured in Hong Kong 2. Supply chain minimum order quantities and lead times for custom components, dyed and printed fabric, zippers and snaps 3. forecast uncertainty -> optimal order quantity calculations based on information that is apparently very well understood by Sport Obermeyer (e.g. 24% profit on items sold, 8% loss on unsold items, and historical forecast and actual information analyzed to reveal standard deviation) 4. Item Reduction
a. We have found that some of the items projections are very unstable. There are women’s parkas like the Stephanie that we found has the possibility of only selling one hundred units or could sell over a thousand. This is based on past sales. This makes it very hard to predict how many units to order. b. Sport Obermeyer should limit the number of items that they produce. Items such as the Stephanie that have such volitale sales should be eliminated. This will reduce over ordering. It will also allow Sport Obermeyer to focus on the items that are still in production. They can increase the quality and appeal of the style, which will help them sell more of these products.
Supply Chain Management...