SCM Case Analysis

Submission
Sports Obermeyer
GARIMA SINGLA
NAVAM GUPTA
RAHUL YADAV
SIDDHARTH DAS
DEEPIKA PV

GROUP 2
SECTION A

(PGP/18/020)
(PGP/18/033)
(PGP/18/042)
(PGP/18/052)
(PGP/18/189)

Ques 1: How should he go about planning the orders to be placed in November, keeping in
mind the estimates provided in Exhibit 10?
Sol: We assume that Sports Obermeyer is in the speculative production phase during
November when they place their first order. We assume that the demand has a Normal
Probability Distribution.
Below we determine speculative production quantities.

For k = 0

Style
Gail
Isis
Entice
Assault
Teri
Electra
Stepha
nie
Seduce
d
Anita
Daphne

388
646
496
680
762
807

First product
production
quantity
1017
1042
1358
2525
1100
2150

1113

1048

1113

4017
3296
2383
20001

1113
2094
1349

4017
3296
2383
20001

Mean
1017
1042
1358
2525
1100
2150

Standard
deviation

For k = 0, the total production volume is 20,001 which is above what we want to produce. We
want to produce 10,000 units. So we find the value of k for which the total quantity
produced is 10,000.
Below is the analysis.

Style
Gail
Isis
Entice
Assault
Teri
Electra
Stepha
nie
Seduce
d
Anita
Daphne

388
646
496
680
762
807

First product
production
quantity
605
356
831
1803
291
1293

1113

1048

4017
3296
2383
20001

1113
2094
1349

2835
1072
950
10036

Mean
1017
1042
1358
2525
1100
2150

Standard
deviation

1.0620
23

Q1.xlsx

So we should order the above quantities and they are received for a value
of k = 1.062

Ques 2. What operational changes would you recommend to Wally to improve

performance?
Demand forecasting system
Key Problems

Ski Clothes is fashionable product which has a short life cycle.

The firm has only one ordering opportunity

So the firm requires long time of planning and production activities: how much to
stock in order to meet the demand

Uncertain forecasting due to customer demand: If the firm produces too much stock
it will be left with excess inventory and if it produces too little stock, it will have to
forgo sales.

Operational Changes

Reducing the number of styles of Ski clothes handled will make demand forecasting
for individual style more predictable

Production system
Key Problems

Large lead times for raw materials especially fabric dyer. Dyer has long lead time on
greige goods and needed to keep their capacity utilized year round but can change
colors overnight

Total annual sales and sales of basic colors prediction was possible, but predicting
fashion colors was not possible

Operational Changes

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

One year commitment on greige goods and capacity

Basic colors can be dyed early in year and fashion colors can be dyed late in season
on few days notice

Supply chain system

Key Problems

Obermeyer contracts with fabric suppliers to manufacture a specified amount of fabric

of a given type each month

Sports Obermeyer sold its product through speciality ski-retail stores and few
department stores

Operational Changes
Increasing bargaining power with big suppliers that can commit on timeline
Increasing distribution channel to a country that have different period of product usage so that
excess inventory left can utilized in the country

Information system

Since 80% of its annual order volume is received by the week following the Las
Vegas show, by using IS , the firm can collect the data backward and analyze the
demand of the show in Vegas and compare with actual purchase.

Use of data and information and utilize historical data or Committee forecasting or
Research and Trend & Market Movement to predict the demand

Ques3. Implications of sourcing from Hong Kong versus China?

Ans. From table 2-18 and 2-19, we can infer that the cost of material is same if sourced from
Hong Kong or China. The only major difference is labour cost which is $3.84 per hour in
Hong Kong versus $0.16 per hour in China. But also the products manufacturing rate in Hong
Kong is twice of that of China and minimum order size is half that of China. This makes the
lead time longer in case of China as compared to Hong Kong. In terms of quality, Hong Kong
has 5 times better quality than that of Chinese products. For long term, if the production
quality is improved in China then it will be more beneficial for the company to source from
China.
Factor
Hourly wage

Hong Kong
$3.84
~ 25 times more than the
Chinese rate

China
$0.16

Weekly output per worker

Labour content per Parka
Repair Rate
Minimum order quantity
Labor cost/Garment

19 parkas
2.35 hours
~1-2%
600
3.69US$
~5 times more than the
Chinese rate

12 parka
3.6 hours
~10%
1200
0.78 US$

Characteristic

Hong Kong

China

Level of skill

Higher

Lower

Degree of cross worker Higher

training
Minimum
Production Smaller
Quantity
Production Line
Smaller

Lower

Flexibility

Higher

Lower

Speed

Faster

Slower

Labour Cost

Higher

Lower

Throughput Time

Lower

Higher

Larger
Larger

In case of smaller quantity, Hong Kong will give better returns whereas China will be a
better option for large quantity orders.
In the short term, it is better to source from Hong Kong while in the long term, it is
better to source from China.