About Obermeyer<br />Founded in 1947 in Aspen, Colorado Sport Obermeyer was born of necessity by Klaus Obermeyer.<br />As an Aspen ski instructor, he became aware of the need to keep his ski school students warm and dry .<br />Today, Obermeyer continues to design and produce innovative and technically responsible authentic skiwear from the heart of the Rocky mountains<br />
3<br />3<br />Issues<br />Question: What are the issues driving this case?<br />How to measure demand uncertainty from disparate forecasts<br />How to allocate production between the factories in Hong Kong and China<br />
4<br />4<br />Describe the Challenge<br />Long lead times:<br />It’s November ’92 and the company is starting to make firm commitments for it’s 93 – 94 season. <br />Little or no feedback from market<br />First real signal at Vegas trade show in March<br />Inaccurate forecasts<br />Deep discounts<br />Lost sales <br />
Less flexible</li></li></ul><li>Order Cycle<br />Sold its products primarily through specialty ski-retail stores, located either in urban areas or near ski resorts.<br />Also few large department store and direct mail retailers<br />Most retailers requested full delivery of orders prior to the start of retail season<br />Peak sales occurred in December and January<br />
Design process<br />Design process began in 1992<br />Europe more fashion forward than US<br />Major trade show for ski equipment and apparel was held in Las Vegas<br />Sketches were sent to Obersport for prototype production in July and designs were finalized by September<br />
Sample Production<br /><ul><li>As soon as designs were finalized, Obersport began production of sample garments small quantities of each style-color combination for the sales force to show to retailers.
Sales representatives started to show samples to retailers during the week-long Las Vegas show, typically held in March, and then took them to retail sites throughout the rest of the spring.</li></li></ul><li>Raw material sourcing and production<br />They placed orders for raw materials quickly as suppliers lead times were very high<br />Cutting and sewing of Obermeyer's first production order began in February 1993<br />
Retailer ordering process<br />During the Las Vegas trade show, most retailers placed their orders; Obermeyer usually received orders representing 80% of its annual volume by the week following the Las Vegas show.<br />Retails placed replenishment orders for popular items during peak retail season<br />
Shipment to Obermeyer warehouse<br />Transported by ship from Obersport's Hong Kong warehouse to Seattle, from which they were trucked to Obemreyer's Denver distribution center.<br />Air freighting was essential for goods from China<br />Quota restrictions were imposed on products from China<br />
Shipment to retail; Retail Replenshipment order<br />Towards end of august orders were sent to retailers<br />By February Obermeyer started to offer replenishment items to retailers at a discount.<br />Items remaining at the end of the season were held over to the following year and sold at a loss.<br />
Supply Chain<br /><ul><li>Obermeyer sourced most of its outerwear products through Obersport
Obermeyer would specify how it wanted the fabric to be dyed or printed.
Obersport purchased shell fabric from vendors in the United States, Japan, Korea, Germany, Austria, Taiwan, and Switzerland.
Lining fabric was sourced primarily from Korea and Taiwan.</li></li></ul><li>Prior to the start of the season, Obersport would work with its subcontractors to prepare a small batch for each color that was required in a given fabric.<br />In addition ObersPort worked with its printing subcontractors to develop "screens" which would be used to print patterns on fabric.<br />
<ul><li>Immediately after receiving production instructions from Sport Obermeyer Obersport asked subcontractors to dye or print fabric.
Insulation materials were purchased from DuPont, whose licensees in Hong Kong, Taiwan, Korea and China could provide them within two weeks.
Many snaps were purchased from German vendors</li></li></ul><li><ul><li>Most zippers were purchased from YKK, a large Japanese zipper manufacturer.
Approximately 6O% of Obersport's zipper requirements were sourced from YKK's Hong Kong factory, where standard zippers were manufactured.
Obermeyer products were produced in a number of different factories in Hong Kong and China.</li></li></ul><li>Cut & Sew<br /><ul><li>Workers in Hong Kong worked about 50% faster than their Chinese counterparts.
Workers were paid on a piece-rate basis in both China and Hong Kong
Wages in China were much lower than in Hong Kong
Obersport was responsible for monitoring production and quality at all subcontractor factories</li></li></ul><li>Where to produce<br /><ul><li>Obermeyer expects to produce about half of all its products in China.
Problems;</li></ul>Larger minimum order limit the company’s ability to increase the range of product<br />Is increased production in China risky due to its uncertain trade relationship with US<br />