Sport Obermeyer is faced with the supply challenge of long lead times. Year after year the company faces a challenge of trying to forecast next seasons anticipated demand primarily on qualitative results. Ultimate success of the line is highly dependent on how well the company was able to predict future market response. The main challenges noted in this case for Sport Oberymery were as follows: -How to measure demand uncertainty from disparate forecasts -Allocation of production between factories in Hong Kong and Mainland China.
In recent years greater product variety and more intense competition has made accurate predictions for Sport Obermeyer very difficult. The Ski wear industry is a competitive marketplace. Key industry leaders such as The North Face also targeting high-end outdoor savvy consumers and Columbia Sportswear a company which offer supplementary lower-priced, high-volume styles also hold a substantial percent of the market.
Illustrated in Appendix A is a strategic analysis reviewing Sport Obermeyer’s competitive forces. The analysis identifies that the company’s main way to gain a competitive edge would be the way it deals with its suppliers. Currently the company outsources 50% of its production initiates in China. However with production at a cheaper price comes high minimum order requirements, this could result in a large problem if anticipated demand is inaccurate. As a result would be very costly for Sport Obermyer to produce large quantities of specified products if they are unsure of how they will sell in the marketplace. Furthermore, the Ski Clothes are considered fashionable products with relatively short life cycle, overproducing a particular item would be a major disadvantage for the company financially as an ‘unfashionable’ product would be sold at a major loss in the off season.
Sport Obermeyer executes a lengthy two-year cycle that mismatches resources and production peak periods. As a result of long lead times most retailers request full delivery of orders prior to start of retail season. A critical path throughout operations identified which includes snaps, finishing shell fabric and zippers, which can take up to 12 weeks.
Obermeyer sourced outerwear products through Obersport. The Obermeyer encompasses a broad supply chain, ranging from Aspen to Asia, one in which is comprised of long lead times. Obersport purchases shell fabric from vendors in the US, Japan, Korea, Germany, Austria, Taiwan, and Switzerland. Obermeyer products are produced in a number of different factories in Hong Kong and China. A crucial component of effective supply chain operations lies within sewing operations. Workers in Hong Kong worked about 50% faster than their Chinese counterparts. However, wages in China were much lower than in Hong Kong.
Reduce Product Variation
It is recommended that Sport Obermyer reduce product variation in terms of style, size, and color along with shortened lead times in turn attempts to create a more efficient manufacturing process. By limiting products and focusing on a few key colors the company will be able to reduce costs allowing efficient and effective operations with increased product quantity. This is a strategic move, as target consumers will view new operations as the company targeting their high performance consumer rather than an overall span of the market.
Produce Half of Sport Obermyer Products in China
With a larger minimum order limit the company’s ability to increase range of product. Furthermore, increased production in China is risky due to uncertain trade relationship with US. It is recommended that Sport Obermyer manufacture large, high cost, assembly processes like shells and liners in China in order to set off higher costs of utilizing Hong Kong capability to rapidly manufacture trending items late in the...