A Strategic Direction in Forecasting
Introduction & Summary
Klaus Obermeyer is an innovator in the high-end skiwear industry. The company began with down filled jackets and slowly began to diversify its product line with high-altitude suntan lotion, turtlenecks, nylon wind-shirts, mirrored sunglasses and more. In 1961, the first Sport Obermeyer factory warehouse opened in Aspen, and the innovations continued with “soft-shell” jackets, double lens goggles, and the first waterproof-breathable fabrics to be used in clothing.
Sport Obermeyer is a high-end fashion skiwear design and merchandising company with its headquarters located in Aspen, Colorado. The company specializes in selling its products in U.S. department stores and ski shops. Although the company has a global supply network, most of its outerwear products are channeled through Obersport.
In the fashion skiwear industry - demand is very dependent on several factors that are difficult to predict. The inconsistent nature of the economy, fashion trends and weather create a significant challenge for a firm such as Sport Obermeyer. By actively applying a selection of appropriate forecasting methods and continuing to adapt to this fast-paced industry, Obersport would be able to remain competitive and retain or increase its 1992 high market share entering into the 1993/94 season.
A joint venture was established between Klaus Obermeyer and Raymond Tse in 1985. This company gained the title of Obersport Ltd. This joint venture allowed Obermeyer to manage supply and production operations in Hong Kong and China.
Until the mid-1980s, Obermeyer followed a simple design-and-sales cycle: ➢ The first stage was to design the product, then fabricate and showcase samples to retailers in March usually at fairs/shows ➢ The second stage was to place production orders with suppliers in March and April after receiving retail orders from the fairs/shows. ➢ The third stage was to receive goods at Sport Obermeyer’s distribution center in September and October; and ship product immediately to retail outlets.
During the mid-1980s, several factors rendered this approach obsolete: ➢ As sales volume grew, the company hit manufacturing ceilings during the peak ski wear-production period. ➢ Being unable to order sufficient quantities during critical summer months reduced the supply for ongoing demanded volume, to be produced after it has received retail orders. Therefore, the company begins booking production the previous November, or about a year before goods would be sold, based on speculation about what retailers would order.
Processes and Strategies
A ski jacket being distributed in the U.S. could be asembled in China from fabrics and findings (zippers, snaps, buckles, and thread) sourced from Japan, South Korea, and Germany. This global supply chain (Exhibit 1.0) created more product variety and improved production efficiency, but at the same time greatly increased lead times. Reaction to the lengthening supply chains, limited supplier capacity, and retailers’ demands for earlier delivery were all prominent obstacles. Obersport began developing a variety of quick-response initiatives such as to shorten lead times to overcome them.
First introduced were computerized systems to slash time in processing orders and computing raw-material requirements. This technology would anticipate what raw materials it would require and pre-position them in warehouses in the Far East because lead time for obtaining raw materials proved difficult to shorten. To shorten this time Obersport used air freight for delivery from the Far East to the Denver distribution centre as delivery due dates quickly approached. In the 1990s, these changes had reduced delivery times by more than one month.
Along with these changes, the Sport Obermeyer applied some other tactics in the 1990s. Obermeyer persuaded some of...