PowerPoint Presentation

Presented By: GROUP 6Abhijeet Kumar 13PGP001Akshay Sharma 13PGP008Kaiwalya Misra 13PGP025Hemant Nagalkar 13PGP033Sharad Kumar 13PGP052

CONTENTSOrigins traced to 1947.Over years, Prominent competitor in US skiwear market.1992: 45% share in Children skiwear and 11% share in adult skiwear market.1992: estimated sales $32.8 Million.Product Line: Parkas, vests, ski suits, shells, ski pants, sweaters, turtle necks, and accessories. Mens, Womens, Boys, Girls and Preschoolers.

INTRODUCTION

Excellent Price/Value relationship.Value is defined as both functionality and style.Target Market: Middle to High End of skiwear market. BRAND HIGHLIGHT

MANUFACTURING STRUCTURESPORT OBERMEYER LTD. OBERSPORT LTD. ALPINE LTD. OTHER SUBCONTRACTORHong KongMacauChinaLo Village, ChinaHong KongTHE SUPPLY CHAINTextiles & accessories suppliersApparel ManufacturersObersportSport ObermeyerRetailersProduce, 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.ORDER CYCLEThe Design ProcessSample ProductionRaw material sourcing & productionRetail ordering processShipment to Obermeyer warehouseShipment to RetailPLANNING & PRODUCTION CYCLEFEBRUARY92MAY92JULY92SEPTEMBER92DEC- FEB94APRIL-JULY93MARCH93NOVEMBER92Design Process Concept FinalizationSketches sent to ObersportDesigns FinalizedPlace 1st production OrderLAS VEGAS SHOWAdditional Orders placedReplenishment Order receivedInaccurate Forecast Mechanism:In Nov 1992 the company has to place 1st order with suppliers for 93-94 sales.Based on intuition, experience and sheer speculation.Las Vegas trade show is scheduled in March93.

After Effects:Excess merchandise and had to be sold at deep discounts.Inability to provide the most popular items during the season resulting for loss of sales.

Production Location Dilemma : China or Hong Kong

PROBLEMSUsing the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume: that all ten styles in the sample problem are made in Hong Kong, and that Obermeyer's initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial analysis).PROBLEM STATEMENT 1EXHIBIT 10INDIVIDUAL FORECASTStyleLauraCarolynGregWendyTomWallyGail9001,0009001,3008001,200Isis8007001,0001,6009501,200Entice1,2001,6001,5001,5509501,350Assault2,5001,9002,7002,4502,8002,800Teri8009001,0001,1009501,850Electra2,5001,9001,9002,8001,8002,000Stephanie6009001,0001,1009502,125Seduced4,6004,3003,9004,0004,3003,000Anita4,4003,3003,5001,5004,2002,875Daphne1,7003,5002,6002,6002,3001,600Totals20,00020,00020,00020,00020,00020,000StyleAverage ForecastStandard deviation2 x Standard DeviationGail1,017194388Isis1,042323646Entice1,358248496Assault2,525340680Teri1,100381762Electra2,150404807Stephanie1,1135241,048Seduced4,0175561,113Anita3,2961,0472,094Daphne2,3836971,349Totals20,000DETERMINING SPECULATIVE QUANTITYStyleAverage Forecast () Standard Deviation()Production Quantity(-k)Gail1,017388629Isis1,042646396Entice1,358496862Assault2,5256801,845Teri1,100762338Electra2,1508071,343Stephanie1,1131,04865Seduced4,0171,1132,904Anita3,2962,0941,202Daphne2,3831,3491,034Totals20,00010,618Using k=1StyleAverage Forecast () Standard Deviation()Production Quantity(-k)Gail1,017388241Isis1,0426460Entice1,358496366Assault2,5256801,165Teri1,1007620Electra2,150807536Stephanie1,1131,0480Seduced4,0171,1131,791Anita3,2962,0940Daphne2,3831,3490Totals20,0004,099DETERMINING SPECULATIVE QUANTITYUsing k=2Since using K=1 gives an estimation of final quantity of 10,618 which is close to our requirements of at least 10,000 we will use this data for placing the production orders.

CONCLUSIONGailIsisEnticeAssaultTeriElectraStephanieSeducedAnitaDaphne6293968621,8453381,343652,9041,2021,034What Operational changes would you recommend to Wally to improve performance?PROBLEM STATEMENT 2Company operations:Majorly Innovative Products 95%New products yearly200 demand errorHigh market mediationNeed speed & flexibility

Company Operations:Key Challenges:Ski Clothes is fashionable product, Its life cycle is short Long time of planning and production activities Uncertain forecasting due to customer demand Fashion taker >> No R&D17 Reducing number of styles handled and to predict customer demand for individual style.

To create promotion strategy to persuade retailers to order.

OPERATIONAL Changes:PRODUCTION SYSTEM

Increasing production Quality of China to be closed to Hong Kong.

To reduce lead time of production especially the preparation of raw materials.

OPERATIONAL Changes:Lead time reductionFabric dyer lead time of several months. Dyer has long lead time on greige goods and needed to keep their capacity utilized year round but can change colors overnight.Obermeyer can predict total annual sales and sales of basic colors, but cant predict fashion colors.

Fabric ProducerFabric DyerCut/Sew FactoryDenver WarehouseRetailerundyed greige goodsSport ObermeyerAsiaConsumerSolution: Offer dyer one year commitment on greige goods and capacityDye basic colors early in year and fashion colors late in season on few days notice

OPERATIONAL Changes:SUPPLY CHAIN SYSTEM Increase bargaining power with suppliers by ordering via big supplier that can commit on timeline

Collect stock raw materials which is base on Ski cloth production

Increase distribution channel to a country that have different period of product usage

Increase services level requirements

Establish DC in Seattle to reduce lead time and cost from inland transportation from Seattle to Denver.OPERATIONAL Changes:

Hong KongSeattle

Original distribution process:

Establish Distribution Center in Seattle without through DenverINFORMATION SYSTEM

Collect the data backward and analyze the demand of the show in Vegas and compare with actual purchase.

Speedup data/information analysis and utilize historical data /Committee forecasting / Research and Trend & Market Movement.OPERATIONAL Changes:How should Obermeyer management think (both short-term and long-term) about sourcing in Honk Kong versus China?PROBLEM STATEMENT 3 TOPIC HONG KONG CHINAHourly wageHK$30

[ HK$7.8 = US$1 ]RMB 0.91

[RMB 5.7 = US$1 ]Hourly wage Comparison(In US $)30/7.8= US$ 3.84

~ 25 times more than the Chinese rate0.91/5.7 = US$ 0.15Working hours8 hours/day, 6 days/week

Total : 48 hrs/week9 hours/day, 6.5 days/week

Total = 58.5 hrs/weekWeekly (output/worker)19 parkas12 parkasLabor cost / GarmentHK$ 75.6= 75.6/7.8 = US$ 3.69

~ 5 times more than the Chinese rateRMB 4.45

= 4.45/5.7 = US$ 0.7827 TOPIC HONG KONG CHINALine configuration10-12 people/line

12 x 3.84 = US$ 46

~ 7.5 times more than the Chinese rate40 people/line

40 X 0.15 = US$ 6TrainingCross-trainedTrained for single operation onlyMin order quantity600 units in same style1200 units in same styleRepair rate1-2%~10%Challenges1. Wage Rate (very high)2. Workforce

[ Low unemployment (~2%) ,Younger workers prefer office jobs ]

Workforce

[ Less quality and cleanliness conscious,Training requirement ]Hong KongBenefitsFaster productionMore flexibleHigh QualityLess repair rate (1-2%)Better for higher risk designs

ConcernsSmaller lot sizesHigher labor cost

CHINA (guangdong)BenefitsLower labor costLarger lot sizesBetter for lower risk designs

ConcernsQuality High repair rate / Reliability issueSlower production rateLess flexible

Smaller minimum quantities in Hong Kong yield higher returns even though the unit cost is higher

In China , minimum order quantity is higher, extra need to paid even if small quantity is required.

Extra Products less likely to be sold.

China should be targeted only if the quantity is higher.

It may consume the import quota if produced more and then imported more.

ANALYSISRecommendationHONG KONGShort Term Sourcing

CHINALong Term Sourcing

Short Term (only if quantity is higher)THANK YOU