Palu Gear

Word Count
NorthWestern University
March 20, 2001 Rev. 5/17/2006
In 1980, Max Storm started a small mountaineering gear retail
store in Northern Colorado. The store rapidly became known as
Palü Gear, an apt name given all the stories Max told each
customer about his memorable ascend of Piz Palü. Located on
the border with Italy in Switzerland near worldly St. Moritz, Piz
Palü is known among mountaineers for its striking triple
summits, with the central summit being the highest at 3905m.
Its close and highest neighbor is Piz Bernina (4049m), whose
Biancograt is the most famous snow crest in Europe.
Twenty years later, Max had opened four additional retail stores and his operations were covering the
major regions in the U.S. The retail stores were fully owned by Palü Gear and operated as profit
centers. Their main product line was a family of in-house designed high-tech jackets that were fully
waterproof while being breathable and lightweight. These versatile jackets sold throughout the entire
year and their demand was not materially affected by time of the year. Annual jacket revenues for
each store were of similar size and amounted to roughly $1,000,000 per store. Following the Nafta
agreement, Palü Gear had decided to focus on its core competencies of design and retail and to
outsource production to a textile contract manufacturer in Northern Mexico. Palü jackets sold at an
average retail price of $325, which represented a mark-up of 30% above what Palü paid the
The current supply chain operated as follows. Being a profit center, each store made its own inventory