Sports Obermeyer, Ltd, a fashion skiwear manufacturing company, faces an array of issues before starting a new production cycle. The right timing for the production decision, prediction of production volume, associated risks, production process key steps that add value, and productivity issues are all concerns that must be addressed.
The first step of Obermeyer’s decision making is to decide sample production volumes. The sample production (10,000 units made in Hong Kong) will be used for the Las Vegas trade show that takes place 17 months prior to the actual retailing season. The decision for the season’s full production has to be made after some indication of demand that the show will determine. However, the sample production volume is determined primarily through the recommendations of the buying committee.
To be able to make an accurate forecast, past data and some level of actual orders should be available. The challenge of the first sample production order is, with a lack of historical data, the forecasts of six experts are the main source of decision making information. In this case, the data relied on is mostly qualitative; however, the decisions that are made are supported by quantitative results when possible. The amount of potential losses is determined in order to quantify the risk for each product. Production Issues
In March, the annual trade show in Las Vegas provides a good indication of yearly sales based off of retail orders. The production process takes seven months and the peak sales season for Obermeyer Sports, Ltd’s parkas falls in December and January. This forces a decision regarding production to take place immediately following the trade show in order to have finished products delivered and on display in retail stores for peak selling times. Key Issues
The decision of how many garments to produce in each style is made following the spring trade show in Las Vegas. Obermeyer can expect pre-sales from this venue to account for 80% of their yearly sales. The orders provide a strong prediction of popular styles so supply can accurately match future sales. The key issues facing Obermeyer Sports, Ltd. are; * Staying ahead of fashion trends
* Allotting enough time for production of raw materials and garments * Time factors for shipping finished product
* Quota restrictions on imports from China.
The first key issue is staying ahead of fashion trends. In order to ensure high sales of the finished product, the design team must research popular fashions in other countries and consider future sales of top grossing styles from last year’s season. This is a lengthy process and must be initiated a year or more prior to production. Fashion trends are constantly changing so the research and design of trendy styles must me made quickly before fashion demands evolve.
The second key issue is time for production. Suppliers of raw materials need time to produce the large quantity of fabrics requested. The process of dying, cutting and printing fabrics can sometimes take up to 90 days. Once all of this is complete, the raw materials have to be converted into a finished product. The company outsources all of its production to facilities in Hong Kong and China.
The third key issue is the shipping of the finished product back to Obermeyer warehouses in the United States. The process of Hong Kong shipping their garments by boat to Seattle takes approximately 6 weeks. China’s garments are air freighted and frequently run into quota limits on imported goods.
The fourth key issue is the strict quotas imposed on Obermeyer for imported goods. The United States port of entry regulates the quantity of imports from China in each category of goods. All companies producing similar garments to Obermeyer are competing to receive their shipments before quotas are exceeded. A sense of urgency arises from the quota limit that affects all steps...