WRITTEN ANALYSIS OF CASE

Title of Case: Sports Obermeyer

Submitted by Ahmed
ERP-ID: 123455
BACKGROUND AND KEY ISSUES:

The case describes an operations issue being faced by Sports Obermeyer Ltd, a fashion skiwear
manufacturer. The primary issue of concern is that the company has no metric to gauge the market
acceptability of its products before going into the next production cycle. in fact, the company had not
idea about how customers had received its previous years offering, and hence was unable to commit
which variants and SKUs to product for the upcoming year. The case aptly calls this a fashion gamble. In
short, the two key issues to be resolved by the protagonist of the case Mr. Wally Obermeyer, are the
follows:

• How to make appropriate production commitments for the coming year's line.

• How to allocate production between the factories in Hong Kong and China.

ABOUT THE COMPANY AND MANAGEMENT:

Sports Obermeyer was established in 1947 by Klaus Obermeyer. Over the years, the company became
famous for fashionable ski-wear as the US market was lagging Europe as far as fashion was concerned, a
gap that Klaus filled. In 1992, the company had a market share of 45% in children wear and 11% in adult
wear.

The company operations strategy is focused on two areas: Delivery and Flexibility. Effective
implementation of the company's product strategy relied on several logistics related activities.
Delivering the end product to the retailers was a time sensitive activity as it would lose out on sales if it
underproduced and incur losses on inventory write-downs and discounted sales if it overproduced. Also,
the company would ensure that the retailer gets replenished with the requisite product, be it by air mail
or UPS packages. Also, the company more than 700 SKUs and produces products for 5 different market
segments called 'genders'. Also, the company continually adjusts it forecasts as and when certain events
unfold, such the Las Vegas show, as also shown in Exhibit 5. This shows that the company is focused on
flexibility as well.

The founder of the company, Klaus Obermeyer, believed that the company should achieve harmony
with the external environment and not try to fight. On the other hand, his son Wally Obermeyer, being
an MBA, believes in concrete data analysis, which is contrary to his father's intuitive decision-making
style. This analytical tendency is evident in his quantitative mechanisms to predict demand.
THE ORDER CYCLE:

The order cycle of Sports Obermeyer can be summarized as follows:

ANALYSIS OF PRODUCTION FACILITIES:

Obersport, a joint venture between Sports Obermeyer and Raymond Tse, MD Obersport, was
responsible for fabric and component sourcing for the company. There were two options for sourcing,
Hong Kong Alpine factories and the factory complex in Guangdong China. The problem with the Chines
facility was that worker skill level was very low. Also, Hong Kong workers were cross trained and could
multi task. A Hong Kong sewers output was nearly twice that of a Chinese worker. However, Chinese
labor was much cheaper than Hong Kong. The cost information in Exhibit in terms of USD is as follows:

PRODUCTION PLANNING; THE CRITICAL FRACTILE METHOD

We use the critical fractile method to calculate the probability of Sport Obermeyer meeting the
customer demand. As per the following calculations, for the Rococo Parka, there is a 25% chance that
the company would not be able to meet the demand. Put another way, there is a 75% probability of
meeting demand,