Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Sport Obermeyer
TEAM 8 CASE STUDY
C580 – OPERATIONS MANAGEMENT
INDIANA UNIVERSITY
KELLEY SCHOOL OF BUSINESS
1. How Many Units of Each Style Should Be Ordered for Initial
Production Phase? What is the forecast reasoning?
Forecast M...
1. How Many Units of Each Style Should Be Ordered for Initial
Production Phase? What is the forecast reasoning? (cont’d.)
...
2. What Operational changes would you recommend to
improve performance?
Recommendations
 Reduce the number of styles hand...
3. How Should Obermeyer Management think, both short-
term and long-term, about sourcing in Hong Kong vs. China?
 Hong Ko...
Upcoming SlideShare
Loading in …5
×

Sport Obermeyer case study_team8_submit

10,285 views

Published on

Sport Obermeyer - Team 8 Submission

Published in: Data & Analytics
  • Login to see the comments

Sport Obermeyer case study_team8_submit

  1. 1. Sport Obermeyer TEAM 8 CASE STUDY C580 – OPERATIONS MANAGEMENT INDIANA UNIVERSITY KELLEY SCHOOL OF BUSINESS
  2. 2. 1. How Many Units of Each Style Should Be Ordered for Initial Production Phase? What is the forecast reasoning? Forecast Methodology  Obermeyer used combination of the “panel consensus” and “Delphi method” of qualitative forecasting for sales forecasts  We used a single period inventory model to estimate the financial risk of underestimating and overestimating demand  Single point forecast data provided is limiting. More complicated forecasting techniques require actual data collected over time  Recommend next sales forecast results are summarize and redistribute to the team. Given results new questions should be asked of the team in regards to what assumptions to apply in the decision making process Forecast Assumptions  Initial 10,000 unit order is riskier due to lack of demand information. Second 10,000 unit order is less risky because of better demand information on each style.  The expected lose from liquidating inventory due to overestimating demand is assumed to be 8% of the wholesale price  The cost of lost profit from underestimating demand is assumed to be 24% of the wholesale price  The second order will allow us to adjust for quantities of each style based on better demand information
  3. 3. 1. How Many Units of Each Style Should Be Ordered for Initial Production Phase? What is the forecast reasoning? (cont’d.)  Strategy is to estimate the optimal order quantity, which occurs when the expected profits from ordering one additional unit become less than expected costs  The optimal order quantity is adjusted to meet expected capacity of 10,000 8% 24% 24.13% Style Pricea Co Cu P Z score 2 x Std. Deviation Change from mean Average Forecast Break Even Order Qty Half Forecast Adjusted for 10,000 Entice 80$ 6.40$ 19.20$ 0.75 0.674 496 335 1,358 1,693 847 642 Assault 90$ 7.20$ 21.60$ 0.75 0.674 680 459 2,525 2,984 1,492 1,132 Seduced 73$ 5.84$ 17.52$ 0.75 0.674 1,113 751 4,017 4,768 2,384 1,809 Gail 110$ 8.80$ 26.40$ 0.75 0.674 388 262 1,017 1,279 640 485 Isis 99$ 7.92$ 23.76$ 0.75 0.674 646 436 1,042 1,478 739 561 Teri 123$ 9.84$ 29.52$ 0.75 0.674 762 514 1,100 1,614 807 612 Stephanie 133$ 10.64$ 31.92$ 0.75 0.674 1,048 707 1,113 1,820 910 690 Anita 93$ 7.44$ 22.32$ 0.75 0.674 2,094 1,412 3,296 4,708 2,354 1,786 Electra 173$ 13.84$ 41.52$ 0.75 0.674 807 544 2,150 2,694 1,347 1,022 Daphne 148$ 11.84$ 35.52$ 0.75 0.674 1,394 940 2,383 3,323 1,662 1,261 13,181 10,000
  4. 4. 2. What Operational changes would you recommend to improve performance? Recommendations  Reduce the number of styles handled to lower complexity of planning and risk profiles  Reduce production lead times, as the preparation of raw materials takes a long time. For example:  To improve efficiencies, dye basic colors early in the year and fashion colors later in the season  Dyers could be offered a long-term contract regarding Greige goods  Develop relationships with big-time suppliers that are able to meet tight times and requested demand  Create a Strategic Marketing division within the company to better improve promotional marketing strategies  Evaluate another US Distribution center on the West Coast (Seattle or LA). Further, introduce drop shipping  Increase distribution channels and service level requirements  Collect and utilize historic data from previous years to better determine future trends  Where possible, obtain feedback from retailers prior to the Vegas show
  5. 5. 3. How Should Obermeyer Management think, both short- term and long-term, about sourcing in Hong Kong vs. China?  Hong Kong is best for sample production, lot size orders (under 1,200 units), and for providing flexibility and faster response at better quality standards needed to response to unanticipated market trends  Hong Kong is better suited for sourcing higher risk styles  China is better suited for sourcing lower risk styles and for larger lot sizes orders (over 1,200 units)  Longer term strategy should include leveraging relationship, through Obersport Ltd. And Alpine Ltd., to improve training, quality control, and production methods for factory in China to reduce risks while taking advantage of lower prices Hong Kong Pros Hong Kong Cons China Pros China Cons Skilled Workforce Higher Labor Costs Lower Labor Costs Less Skilled Workforce Flexible Production Limited Future Workforce Large Workforce Pool Less Flexible Response Faster Production Slower Production High Quality Outputs Increased Quality Risks Lower Minimum Orders Higher Minimum Orders Better US Trade Relations US Trade Relations Risks

×