Sport Obermeyer’s Products
Executive Summary
The ultimate success of Sport Obermeyer’s products is highly dependent on how well the company can predict market responses to different styles and colors. These forecasts become increasingly difficult due to greater product variety and more intense competition. To combat this growing threat Sport’s Obermeyer needs to improve efficiencies on all frontiers of their global supply chain network. One area of Obermeyer’s global supply chain that will have a critical impact on overall performance is Obersport’s manufacturing process. The fundamental component of this process is how Obermeyer will determine the number of units for each style Obersport should produce during its initial phase of production (November through March) and during its second phase of production (March through October). Additional factors that need to be considered in this decision are the risks associated with each style, from where each product will be strategically sourced (Hong Kong or China), and the numerical and opportunity costs associated with the correlating sourcing decision. Systemic Operational changes are also recommended in order to improve performance in the short and long-term.
Recommendation
The team has identified component commonalities and grouped specific raw materials by lead-time and service level to produce the appropriate quantity of styles for the season (See Figures A-C). These groupings allow the team to align component services levels and achieve mutual production start dates with minimal safety stock. Additionally, the team has assessed benefits in economies of scale when increasing production in China; reducing unit cost of Obermeyer’s products. Furthermore, the systemic operational change of full production postponement will create a tradeoff of increasing shipment costs to reducing overstocking costs, but will prove to be more favorable as the global supply chain is guided by more accurate forecasting data. The team recommends that Obermeyer implement a sourcing strategy with suppliers in both China and Hong Kong. This is supported by the Team’s assessment that price is not the most important component of their parkas mainly due to other more important dimensions of product (See Discussion Topic – Strategic Sourcing).
Analysis
No Minimum Order Quantity Restrictions
In order to determine what items should be produced where, the marginal cost was determined in order to analyze the risk associated with each line. With no minimum quantity restrictions, a single source sourcing strategy was considered first for ideal quantity required to be ordered.
When sourcing with no restriction, nine out of ten styles need to be ordered in order to reach minimum