Obermeyer Sport

Within this case, the Vice President (Wally Obermeyer) of a fashion skiwear manufacturer (Sport Obermeyer) was faced with two major executive tasks. The first and most critical task was committing to specific production quantities for each skiwear item the company would offer in the coming year’s line, and the second task was determining how to allocate those production quantities between factories in Hong Kong and China.

The Forecasting Problem

The problem we are confronted with in this case is to determine an appropriate initial production commitment for the first half of the Obermeyer Sport’s (OS) projected demand for 1993-1994 season. Forecasting demand, and moreover the initial production commitment, was one of the most critical task each year for OS. Management at OS believed that accurate production quantities and timely delivery of the final product to their retailers was a key componenet of an effective implementation of their product strategy. In fact as stated in the case brief “effective implementation of its product strategy relied on several logistics-related activities, including:

Delivering matching collection of products to retailers at the same time.

Delivering products to retail stores early in the selling season.”

However, much to OS’s frustration in recent years inaccurate forecast had been on the rise. OS had identified two factors that were contributing to the increasing difficulty in making accurate prediction: greater product variety and more intense competition.

OS’s management is faced with the problem of having to make firm commitments for producing its 1993-1994 line without the benefit of market acceptance of the 1993-1994 product line. As a result of a complex and highly interrelated design, production, ordering and retail sales cycle, there was little information available on customer response to the 1993-199 line. Additionally, there was a profit vs. loss/risk vs. reward consideration for OS management: ordering too little of a product would result in lost sales and lower profits versus ordering too much which would result in having to liquidate some of the product at a loss. Finally, the forecasting data that had been compiled by OS’s management showed a considerable amount of variation further compounding the inability to accurately forecast annual demand and an initial production commitment.

Product Line Life Cycle

From design to the end of the sales period, the life cycle for a particular line of OS’s product stretched over approximately a two years (from planning to the actual sale). Along the way there were several key milestones some of which afforded management great opportunities (and others great threats) in accurately forecasting demand for their product. Understanding the relationship