"SKIING IS A CELEBRATION OF LIFE" Company Background Klaus Obermeyer founded Obermeyer in 1947, when he was among the first ski instructors on Aspen Mountain. "SKIING IS A CELEBRATION OF LIFE"

Obermeyer Products Gender : men’s, woman‘s, boys’, girls’, preschoolers’ Broad line of fashion ski Style/colour combination & sizes Sweaters Jackets Shells Vests

Manufacturing Structure: Obersport was responsible for fabric and component sourcing for sport obermeyer’s entire production in far east. The materials were cut and sewn in Alpine and subcontract . 80% of Alphine annual production volume came from Obermeyer’s order.

Facilities Map

The Supply Chain Process Textile and Accessories Suppliers Apparel Manufacturers Sport Obermeyer Retailers Obersport Produce, dye and print shell and lining fabrics, supply insulation, zippers, thread, logo patches and snaps. Subcontractors, receive production orders and materials from Obersport. Cut, sew and final assembly. Responsible for material and production sourcing in the Far East. It also acts as a distribution centre for materials and finished goods. Product design, production planning and sales. Purchase from Sport Obermeyer and sell products to consumers. อาจจะไม่ show ใน presentation slides

Planning and Production’s Cycle’93-’94 ‘92 ‘93 ‘93 ‘94 The Design Process Feb’92 : Design process Mar’92 : Las Vegas show (Sample Production, Raw material sourcing and production) May’92 : Finalized design concept Jul’92 : Prototype production Sep’92 : Finalized design Feb’93 : Raw Material sourcing & Production Retailer Ordering Process Las Vegas trade show, Mar’93 : 1st order representing 80% of its annual volume. April-May : 2nd and final production order

Design Process Design Process 1992 Outdoorswear show Munich Las Vegas Show Feb First Order March Nov Design Process 1992 Finalized Design Sep May Design concepts July Prototype Group 9 Flexible MBA #12

Suppliers Component Variety Country of origin Procurement lead time % of total material cost Shell Fabric 10 Japan, USA, Switzerland, Germany, Austria, Korea, Taiwan 45-90 days 30 Finishing of Shell Fabric 8-12 color-prints per fabric Finishing takes place in country of origin (see above) Dyeing or Printing: 45-60 days 13 Finished Lining Fabric 6 Nylon: Korea, Taiwan Fleece: Korea, Taiwan, USA 45-60 days Insulation 3-4 different weights Hong Kong, Korea, Taiwan, China 2-3 weeks 16 Zippers 400 Hong Kong, Japan 60-90 days 12 Thread 80 colors Hong Kong 30 days 2 Logo Patches, Drawcords, Hang Tags, etc. various Mostly from Hong Kong 1 5-30 days Snaps (undyed) Germany, Italy, Hong Kong 1-2 months 3 Dyeing of Snaps 50 colors 1

Manufacturers Total Capacity: 30,000 Units/Month Annual Demand: 200,000 Units Topic Hong Kong China Hourly Wage US $ 3.85 US $ 0.16 Working Hours => Total = 48 hours/week => Total = 58.5 hours/week Maximum overtime allowed = 200 hours/year During peak production periods, workers work 1 3 hours per day Weekly (Nonpeak) Output per Worker 1 9 parkas 1 2 parkas Paid labor time per parka (including repair work) 2.53 hours/parka 4.88 hours/parka Line Configuration 10-12 people/line 40 people/line Training Cross-trained Trained for single operation only Minimum Order Quantity 600 units in same style 1 ,200 units in same style Repair Rate 1-2% 10% Labor Cost/Garment US $ 9.7 US $ 0.78 Total Cost US $ 110 US $ 94 Challenges Wage Rate Lack of training

ORDERING & SHIPMENT Process: Retailers order in Apr-Jun 93 6 weeks Factories in Hong Kong Seattle warehouse Denver warehouse Order 80% in Mar 93 Order 20% in Apr-Jun 93 Forecasts 800 Ski Retailers Retailers order in Apr-Jun 93 Product Sketches Forecast Committee

How demand forecasts improving with increasing information Observe 20% : Final forecast @ 575 units Profit (+24 % of whole sale price) Left unsold: loss( -8% of wholesale price) Observe 80% : Final forecast @ 500 units Group 9 Flexible MBA #12

Production Planning Example Rococo Parka Wholesale price $112.50 Average profit 24%*112.50 = $27 Average loss 8%*112.50 = $9

Issues How to measure demand uncertainty from disparate forecasts How to allocate production between the factories in Hong Kong and China How much of each product to make in each factory

Describe the Challenge Long lead times: It’s November ’92 and the company is starting to make firm commitments for it’s ‘93 – 94 season. Little or no feedback from market First real signal at Vegas trade show in March Inaccurate forecasts Retailers had not purchased>>>>Deep discounts Ran out of its most popular items >>>>Lost sales

Textile and Accessories Supplies The Supply Chain Textile and Accessories Supplies Apparel Manufactures Obersport Sport Obermeryer Retailers Group 9 Flexible MBA #12

Table Cut and Sew (ตัดและเย็บ) ผลิตภัณฑ์ของ Obermeyer ต้องมีขั้นตอนของการตัดและเย็บหลายขั้นตอน (ตาราง 3-15 อธิบายขั้นตอนการตัดเย็บของเสื้อคลุมขนสัตว์ Rococo) การจัดคนเพื่อทำงานจะแตกต่างกันในแต่ละโรงงาน ระดับของคนงานจะขึ้นกับทักษะและระดับของการฝึกอบรม พนักงานใน Hong Kong จะมีความสามารถในการทำงานได้เร็วกว่าพนักงานชาวจีนในงานประเภทเดียวกันประมาณ 50% ในการเพิ่มทักษะการทำงานให้มากขึ้น พนักงานชาวฮ่องกงจะได้รับการฝึกอบรมในลักษณะงานที่มีขอบเขตกว้าง ๆ ดังนั้น สายการผลิตเสื้อคลุมขนสัตว์ในฮ่องกงจะมีความจำเป็นในการใช้คนงานเพียง 10 คนเพื่อทำงานได้อย่างสมบูรณ์ ในขณะที่จำเป็นต้องใช้คนงานชาวจีนถึง 40 คนในการทำงานประเภทเดียวกัน สายการผลิตที่ยาวกว่าในประเทศจีนทำให้เกิดความไม่สมดุลย์ของสายการผลิตขึ้น ดังนั้นพนังงานเย็บผ้าชาวฮ่องกงจะมีปริมาณงานที่ได้มากกว่าพนักงานเย็บผ้าชาวจีน (ตาราง 3-6 แสดงการเปรียบเทียบการทำงานระหว่าง Hong Kong และจีน ตาราง 3-17 แสดงต้นทุนของส่วนประกอบต่าง ๆ ที่ใช้ในการผลิตของโรงงานเสื้อคลุมขนสัตว์ Rococo ที่ Hong Kong และตาราง 3-18 แสดงราคาต้นทุนคร่าวๆ ของการผลิต Rococo ในเมืองจีน Obermeyer ขายเสื้อคลุมขนสัตว์ Rococo ให้กับผู้ค้าปลีก ในราคา $112.50 ในขณะที่ผู้ค้าปลีกตั้งราคาขายที่ $225) Group 9 Flexible MBA #12

Group 9 Flexible MBA #12

Question

Question 1. Using the sample data given in Table 2-20 , make a recommend for how many units of each style Wally should make during the initial phase of production. Assume that all of 10 styles in the sample problem are made in Hong Kong and that Wally’s initial production commitment must be at least 10,000 units. Ignore price differences among styles in your initial analysis?

Question 3. Repeat your methodology and assume now that all 10 styles are made in China. What is the difference (If any) between the two initial production commitments?

Wally’s Forecast Model Mean Mean=Average of Buying Committee Forecast Standard Deviation = 2xSTD of the Buying Committee Forecasted Group 9 Flexible MBA #12

SAMPLE BUYING COMMITTEE FORECASTS, 10 STYLES OF WOMEN'S PARKAS Price Average Forecast Standard Deviation 2 x SD Gail $110 1,017 194 388 Isis $99 1,042 323 646 Entice $80 1,358 248 496 Assault $90 2,525 340 680 Teri $123 1,100 381 762 Electra $173 2,150 404 807 Stephanie $133 1,113 524 1,048 Seduced $73 4,017 556 Anita $93 3,296 1,047 2,094 Daphne $148 2,383 697 1,394 Total   20,000 Minimum Production Quantity For A Style: Hong Kong = 600 Units China = 1,200 Units ** Technically, Wally found that SD of demand was approximately twice SD of the Buying Committee’s forecasts.

Calculate a “Safety Factor” for each style. Safety Factor (SF)= Max (-2m,m-,0) Rank styles by the safety factor, in descending order  Calculate the “Order quantity”. Starting with the top style. Order Quantity = Max (600, -600 – [Min. SF x ]) ** Min. SF among all styles Reference: http://courses.washington.edu/smartman/Ass3.htm

Hong Kong 12,420  Style SD 2 x Total 1st Period Order 3,060 1,707   Price  SD 2 x Hong Kong u - 2m /SD m - u / Safety Factor u - 600 Total 1st Period Order Seduced $73 4,017 556 1,113 2.53 -3.07 3,417 3060.8 3,060 Assault $90 2,525 340 680 1.95 -2.83 1,925 1707.2 1,707 Electra $173 2,150 404 807 1.18 -1.92 1,550 1291.6 1,291 Anita $93 3,296 1,047 2,094 1.00 -1.29 2,696 2025.9 2,025 Daphne $148 2,383 697 1,394 0.85 -1.28 1,783 1336.9 1,337 Entice $80 1,358 248 496 0.32 -1.53 758 599.39 600 Gail $110 1,017 194 388 -0.47 -1.07 0.00 417 292.78 Isis $99 1,042 323 646 -0.24 -0.68 442 235.19 Teri $123 1,100 381 762 -0.13 -0.66 500 256.29 Stephanie $133 524 1,048 -0.08 -0.49 513 177.72 Total 12,420

China 14,327  Style Price SD 2 x  - 2m  - / SD m -  / Safety Factor  - 1,200   Total 1st Period Order Seduced $73 4,017 556 1,113 1.45 -2.53 2,817 2,728 Gail $110 1,017 194 388 -3.56 0.47 -183 -214 Anita $93 3,296 1,047 2,094 0.43 -1.00 2,096 1,928 Isis $99 1,042 323 646 -2.10 0.24 -158 -210 Assault $90 2,525 340 680 0.18 -1.95 1,325 1,271 Teri $123 1,100 381 762 -1.71 0.13 -100 -161 Stephanie $133 524 1,048 -1.23 0.08 -87 -171 Electra $173 2,150 404 807 -0.31 -1.18 950 885 Daphne $148 2,383 697 1,394 -0.01 -0.85 1,183 1,071 Entice $80 1,358 248 496 -0.32 158 118 14,327

Answer 1. & 3. Recommended initial production for operations in Hong Kong and China

1. & 3. Difference between the two initial production commitments Answer 1. & 3. Difference between the two initial production commitments

Question 2. Can you come up a measure of risk associated with an your ordering policy? This measure should be quantifiable. Standard Deviation Coefficient of Variation : SD Average

Answer Coefficient of variation = Standard deviation Average forecast

Answer

Question 4. What operational changes would you recommend to Wally to improve performance? Obermeyer’s Problem Skiwear products have short life cycle Long lead time Volatile demand Demand uncertainty

Operation Changes Reducing number of styles Increasing production quality and efficiency in China to be close to Hong Kong --- Improve Worker Skill Reduce Manufacturing Lead Time Smaller minimum order requirements Improved Market Information Stock raw materials which is base on Ski cloth production

Operation Changes Establish DC in Seattle to reduce lead time and cost from inland transportation from Seattle to Denver Invite the twenty-five largest retail customers to sneak preview in February the year before. Their early purchase orders were used to improve initial forecasts.

Operation Changes Reduce variability and cut the potential for component shortages holding up production. For example, increase the use of black zippers as a color contrast. Standardize colors and materials so that a typical season there are two or three shades for each design cycle instead of five or six.

Question 5 Long Term Short Term How should Wally think (both short term and long term) about sourcing in Hong Kong versus China? Short Term Long Term

Hong Kong Advantages Disadvantages Answer China Advantages High quality More efficiency Smaller minimum order quantity Disadvantages High labor cost Low unemployment China Advantages Low labor cost Disadvantages Low efficiency Larger minimum order quantity Group 9 Flexible MBA #12

Answer Sourcing in Hong Kong Difficult to expand because of low employment and younger workers prefer office jobs Sourcing in China Larger minimum order sizes could limit the company’s ability to increase the range of products and to manage inventory risk How to improve quality and efficiency Recommended sourcing policy: Mixing China: big-lot size, less complex style Hong Kong: small lot size, more complex style Group 9 Flexible MBA #12

Question 5 What kind of sourcing policy do you recommend? Hong Kong Complicated Style Product which require worker’s skill China Basic Style Product – Mass Product

Thank You ! Group 3 YMBA - 29 1 รายชื่อ