Sports Obermeyer
Executive Summary
There were multiple issues weighing heavily on the mind Wally, a VP at Sports Obermeyer, in November of 1992. Sports Obermeyer, a successful manufacturer of ski apparel was having trouble planning the manufacturing levels of its various skiwear items for 1993-94 based on whatever scant information it had on the end customers’ likes and dislikes. Waiting to make these decisions till after the Las Vegas trade show, the one event which would give reliable retailer feedback, would prove very costly given the extremely long lead times of it’s suppliers in Hong Kong and China. In the past, Sports Obermeyer had relied on a group of company managers, called the “buying committee” to make a consensus forecast on the demand of for each of the company’s various products but it’s track was not particularly impressive. In the 1991-92 season, for e.g, some women’s parka styles outsold the original forecast by 200%, while sales of other styles amounted to less than 15% of the forecasted amount [Ref 1] [Exhibit 1]. Going forward the company needed a more reliable way to forecast demand before seeing orders, reduce lead times and decide on the production levels of it’s suppliers in Hong Kong and China.
Question 1:
Is 20000 units the correct amount to anticipate making in total? Why or why not?
20000 may not be the correct amount to anticipate as more analysis will have to be done to determine the optimal quantity of each style of parka, based on the overage and underage costs associated with each style of parka. Also, given that the actual standard deviation was historically twice the forecasted standard deviation injects a lot of risk of incurring overage and underage costs when going with just the average. More analysis is done in answering the following question.
Question 2:
Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production.
There were multiple issues weighing heavily on the mind Wally, a VP at Sports Obermeyer, in November of 1992. Sports Obermeyer, a successful manufacturer of ski apparel was having trouble planning the manufacturing levels of its various skiwear items for 1993-94 based on whatever scant information it had on the end customers’ likes and dislikes. Waiting to make these decisions till after the Las Vegas trade show, the one event which would give reliable retailer feedback, would prove very costly given the extremely long lead times of it’s suppliers in Hong Kong and China. In the past, Sports Obermeyer had relied on a group of company managers, called the “buying committee” to make a consensus forecast on the demand of for each of the company’s various products but it’s track was not particularly impressive. In the 1991-92 season, for e.g, some women’s parka styles outsold the original forecast by 200%, while sales of other styles amounted to less than 15% of the forecasted amount [Ref 1] [Exhibit 1]. Going forward the company needed a more reliable way to forecast demand before seeing orders, reduce lead times and decide on the production levels of it’s suppliers in Hong Kong and China.
Question 1:
Is 20000 units the correct amount to anticipate making in total? Why or why not?
20000 may not be the correct amount to anticipate as more analysis will have to be done to determine the optimal quantity of each style of parka, based on the overage and underage costs associated with each style of parka. Also, given that the actual standard deviation was historically twice the forecasted standard deviation injects a lot of risk of incurring overage and underage costs when going with just the average. More analysis is done in answering the following question.
Question 2:
Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production.