07-02-2013, 11:46 AM
Sport Obermeyer, Ltd.
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Introduction
Sport Obermeyer is a high end fashion skiwear designer and merchandising company which offers broad line of fashion ski apparel, including parkas, vests, ski suits, shells, ski pants, sweaters, turtlenecks and accessories. Obermeyer products were offered in five different genders: men’s, women’s, boys’, girls’ and preschoolers’. But company has inability to predict resulted in excess merchandise and sell at deep discount and other major problem they were facing was of stock out of popular items.
Recommendations
• Once the actual order starts, the initial forecasted orders are updated accordingly and sent to factories in Hong Kong and China.
• Obermeyer has many thousands of SKUs and it is operating on a complex supply chain.
o Decreasing the number of suppliers will help in decreasing the variability of lead times, costs and the minimum orders required to be produces. This in turn reduces the costs involved in dealing with multiple suppliers
o Implementing design-for-supply principles will help in standardizing the process.
Limiting the varieties of YKK zippers, buttons, logo patches, and imported snaps will help in reducing the logistic costs involved
• Producing fewer number of sample products will reduce the time of sample-making and money spent.
o This helps in starting the actual full scale production nearly before 2 months
o Leverage on the company’s brand already built in the market. We may use photographs of sample product instead of producing large number of samples and sending across different stores.
Decision to produce in Hongkong or China?
There are positives as well negatives in manufacturing products in China or Hongkong. For China the positives are that Obermeyer can get cheap labour and can produce in larger lot sizes but concerns are raised about quality and reliability and more importantly the low speed of manufacturing. In case of Hongkong, we see the labour cost is high but the manufacturing speed is twice than that of China and Hongkong’s quality is better. Also Wally cannot source all products to China due to US restriction. Wally’s decision to source half the products to China and half to Hongkong looks viable but he should source them based on its popularity. We can divide all Obermeyer products mainly in two categories namely – ‘High Popular’ and ‘Low Popular’. Due to its high manufacturing speed and high quality we can manufacture ‘High Popular’ products in Hongkong. So all the core products should be manufactured in Hongkong and prevent stock out. The other ‘Less Popular’ can be manufactured in China in Raymond Tse’s factory where we can expect bit of reliability. As sales grow, we should use maximum capacity of Hongkong plants while the remaining should be passed to Chinese one. So we can efficiently supply our orders and also keep overall costs low due to low cost Chinese labours. This will help to keep bottom line growth high.
Conclusion
In order to counter the problems faced by Sport Obermeyer it is advisable to decrease the number of suppliers to maintain consistency of the lead time, costs, etc. Also, decrease the production of sample products and implement the usage of EDI to have better predictions. International Expansion of the company is also recommended. The company should produce its highly popular items in Hongkong while low popular in China.