Inventory and Reebok

When dealing with a market segment that has high variable demand, it is important to analyze not only your current inventory levels, but also generate future demand forecasts. This is because an inventory shortage can cause the company to lose future profits and lost goodwill. In the case of Reebok, the former NFL licensed jersey producer, many key decisions must be made to reduce inventory costs in periods of low demand while maximizing profits in periods of high demand for player specific jerseys. Using the newsvendor model to determine the optimal order quantity and leftover inventory, we will present a possible approach to inventory planning with uncertain demand.
Uncertain Demand:
Within the replica jersey industry, seasonality plays a vital part in keeping sufficient inventory to cover customer demand. Seasonality is regular periodic fluctuations, usually within a 12 month period whereas trend is an overall, persistent, long-term movement. For instance, “the NFL season drives much of the demand” with sales highest in August/September in anticipation of the upcoming NFL season. “Later in the season, consumer demand is driven by holiday presents and the anticipation of the playoffs”. After the season is over, sales decline rapidly until the start of the next season. From a supply chain perspective, however, it is maximizing revenues from “lumpy” hot-market items as much as limiting obsolesce costs.
Postponement:
Reebok must order must it’s ordering decision at the start of a period, though it is concerned with inventory at the end of the period. Postponment allows Reebok to extend the life cycle of its jerseys as well as capture lumpy “dressed” product demand. “Blank jerseys are shipped directly to the Reebok distribution center with no player name or number”. However, teams often change the style or color of their uniforms between seasons. Further, the consumer may want the latest and most up-to-date “dressed jersey” for each individual player that they