Problems
Wally Obermeyer is facing a few problems and a very complicated and uncertain situation.
Sport Obermeyer manufactures a wide variety of winter sport clothing. The entire line and
industry is subject to the changing fashion whims of its customers. Sport Obermeyer is
challenged to hit a moving target two years ahead of the selling season and its product are
only good for that season. It takes about two years from planning to release for one season
of Obermeyer’s line. Further, there is no feedback about the initial forecasting until the Las
Vegas trade show which is in March and after the production has started. After the show in
March, the forecast can be tuned, but the bulk of the manufacturing has been completed.
In review, nine months of planning occur before the initial orders are placed for a new line
at the factories in November. After the initial orders in November, feedback about demand
comes in at the March trade show and reorders and fine-tuning of the forecast can occur.
Between the end of March and September all of the year’s line has to be ordered,
manufactured and shipped to the retailers to be sold from September through the final
reselling period in April.
Forecasting accuracy is the critical link to Sport Obermeyer’s success. If the number of
parkas produced exceeds the expected demand, they then have to be sold at a deep
discount at the end of the season, or sometimes held in inventory longer and sold the next
season for a loss. If too few parkas are sold, then lost revenue and disappointed customers
can have lasting effects such as lost market share and reduced future demand.
There are a lot of moving parts here and a lot of uncertainty in the forecasting. To further
complicate the decision and forecasting process, Obermeyer has to decide where to
produce its goods. Currently there are production facilities in China and Hong Kong which
are managed through a joint venture called Obersport which was established by Klaus
Obermeyer and Raymond Tse. Obersport was run by Raymond and was responsible for
coordinating all the production efforts, including fabric and component sourcing as well as
cutting and sewing in the Far East, specifically Hong Kong, Macau and China. Production
occurred in Tse owned factories called “Alpine” factories or other independent contractors
throughout the region.
Analysis
We do not have historical demand in this case, but the case states that much of the
