Obermeyer Case Questions
1. Define the key problem discussed in the case that Obermeyer is attempting to solve and what key areas of their business and market did they study?
Obermeyer is attempting to solve the key problem of “making supply meet demand”. Because of the variety and number of products being produced, it is more difficult for manufacturers and retailers to predict which of their goods will sell and to plan production and orders accordingly. Inaccurate forecasts are increasing making it so that unwanted goods are left to have to be marked down.
They Studied
- Deal with styles that had irregular demand.
- Hit manufacturing constraints during the peak ski-wear-production period.
- The pressure to reduce manufacturing costs
- Increase variety required Sport Obermeyer to develop a more difficult supply chain
- Limited supplier capacity
- Lead time
- Stock outs and markdowns
- Inaccurate Forecasting
- Early order
- Predict what people would buy
- Committee forecast
- Retailer began demanding earlier delivery
2. Explain each of the methods used by Obermeyer to gain increased market insight onto product demand and explain what the benefit was to the company?
Each of the methods used by Obermeyer to gain increased market insight onto product demand are the different production-scheduling systems such as quick-response
programs, just-in-time inventory systems, manufacturing resource planning, and the like.
- The products that are sold in the United States today may be manufactured in China or other countries. Such a supply chain supported increased variety and enhance production efficiency but greatly increased lead times.
- The company slashed the time it took to process orders and compute raw-material requirements by introducing computerized systems to support those activities.
- Also, because lead times for obtaining raw materials proved difficult to shorten, the company began to predict what materials it would require and pre-position them in a warehouse in the Far East. With materials in hand, Sport Obermeryer was able to begin manufacturing as soon as it received orders.
- As delivery due dates approached, the company turned to airfreight to expedite delivery from the Far East to its Denver distribution center.
- By providing the company with valuable early information of the products, they successful persuading some of its most important retailer customers to places their orders earlier.
- Forecast would tend to be more accurate when the buying committee’s members had similar forecasts. The actual sales data showed that the variance in the individual forecasts was an almost perfect predictor of forecast accuracy.
- Sport Obermeyer use the “Risk-based production sequencing” strategy, which allows them to be as responsive to the market as possible in the areas where the payoffs are the greatest. With this strategy, they can fill nonreactive capacity with those styles for which demand forecasts are most likely to be accurate, and they can use their reactive capacity to devote on making as many of the unpredictable styles as possible.
- They can use the historical sales data to estimate how much stock out and markdown costs would drop as we increased the available amount of capacity committed in reaction to actual early demand information.
3. Explain the new supplier expectations of the relationship between Obermeyer and its suppliers. What were the changes and how did they benefit 1-Obermeyer, 2-the suppliers and 3-the end customers?
- Obermeyer tried to keep their raw materials and factory-production capacity undifferentiated as long as possible. Like the company would began to book factory capacity for the peak production periods well in advance but didn’t specify the exact styles to be manufactured until a later day. Sport Obermeyer would assume the risk of supplying the correct raw materials to the factories. In exchange, the factories allowed production commitments to be made later.
- Sport Obermeyer would redesign its product line to reduce the variety of zippers used. In this case, it helps the company reduced the number of zippers it requires more than fivefold and also cut down the lead-time.
- They also encourage the designers to use the same kinds of raw materials in their patterns. In this way, the company doesn’t have to work with five or six different shades. They also found out that the customers generally don’t notice minute differences in color, because they pay more attention to a garment’s overall appearance, quality of construction, and special features.
4. Explain postponement strategy in terms of Obermeyer and its supply chain, how does it work and what are the benefits to this or any other business. Provide and discuss an example of another company using this strategy and how it allows them to be successful.?
Obermeyer can deal with those styles that had unpredictable demand. The answer to doing this was realizing that the production capacity Sport Obermeyer uses to make ski coats in fact changes in character as the season progresses. Like early in the season, when the company has no orders, the capacity is nonreactive, as orders begin to filter in, then capacity becomes reactive. It is important to fill nonreactive capacity with those styles for which require forecasts are most likely to be accurate, so that reactive capacity can be devoted to making as many of the unpredictable styles as possible. It allows Obermeyer to be as responsive to the market as possible in the areas where the payoffs are the greatest.
One of the companies’s that my Dad used to work for used postponement strategy by keeping ahead with their product making. In the slow times they would work ahead and keep ahead. They did this because there were only 10 fulltime workers and it takes 4 days to start and completely finish a casket. So they would always keep ahead in production incase of last minute orders that would come in so they can keep their customers happy.