2. "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"

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

4. 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.

5. Facilities Map

6. 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.
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7. 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

8. 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

9. 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: 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
days
Snaps (undyed)
Germany, Italy, Hong Kong
1-2 months 3
Dyeing of Snaps
50 colors 1

10. 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

11. 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

12. 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 500 units
Group 9 Flexible MBA #12

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

14. 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

15. 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

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

17. 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 $ ในขณะที่ผู้ค้าปลีกตั้งราคาขายที่ $225)
Group 9 Flexible MBA #12

18. Group 9 Flexible MBA #12

19. Question

20. 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?

21. 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?

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

23. 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.

24. 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:

25. 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

26. 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

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

28. 1. & 3. Difference between the two initial production commitments
Answer
1. & 3. Difference between the two initial production commitments

29. 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

30. Answer
Coefficient of variation =
Standard deviation
Average forecast

31. Answer

32. 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

33. 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

34. 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.

35. 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.

36. 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

37. 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

38. 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

39. 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

40. Thank You !
Group 3 YMBA - 29
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