# Sport Obermeyer Ltd Case Solution

Solution Id Length Case Author Case Publisher
1110 1334 Words (6 Pages) Janice H. Hammond, Ananth Raman Harvard Business School : 695022
This solution includes: A Word File

The future appears bright for Sport Obermeyer if it can successfully manage the three basic problems it is facing in its current rough times. These problems are a) lost sales; b) excess non-saleable merchandise; c) intuitive designing operations. A critical analysis of the cause shows that these effects are offshoots of the same cause: inaccurate forecasting. A basic rule of statistics dictates that more the data points, higher are the reliability and authenticity of the data. Therefore, it can be expected that the newly revised forecasting system will solve the current problem of false forecasting, which has resulted in discounted sales and a sizeable reduction in the company’s profit margins.

## Following questions are answered in this case study solution

1. Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume that all of the ten styles in the sample problem are made in Hong Kong and that Obermeyer's initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial  analysis.)

2. What operational changes would you recommend to Wally to improve performance?

3. How should Obermeyer management think (both short term and long term) about sourcing in Hong Kong versus China?

## Case Analysis for Sport Obermeyer Ltd

#### 1. Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume that all of the ten styles in the sample problem are made in Hong Kong and that Obermeyer's initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial analysis.)

 Style Average Forecast Standard Deviation Forecast Annual Sales Units to be ordered initially Gail 1,017 194 1100 550 Isis 1,042 323 1000 500 Entice 1,358 248 1450 725 Assault 2,525 340 2350 1175 Teri 1,100 381 1200 600 Electra 2,150 404 1900 950 Stephanie 1,113 524 1100 550 Seduced 4,017 556 4000 2000 Anita 3,296 1047 3500 1750 Daphne 2,383 697 2400 1200 Total 20,000 - 20,000 10,000

Even though a lot of differences exist in the forecast of different managers; however, to incorporate the data coming from them and also reflect it in the ordering process, the recommended cut-off for standard deviation is set at 400. Styles having a standard deviation below 400 are ordered as close to their average forecast as possible. Since the standard deviation of the last 5 styles was above 400, the recommended order quantity for such styles is below their respective averages.

Since it is known that forecast of styles with minimum deviations is also backed up by their good sales history; therefore, it can be assumed that they will not generate any extra merchandise at the end of the season. Hence, this will not result in discounted sales and loss to the company.

However, as the sales history has already shown that customers’ perceptions and buying patterns are highly influenced by the festival in Vegas; therefore, only 50 percent of the total expected sales are ordered initially. This would help in mid-season adjustment in case there is an unexpected shift in the buying pattern of the end-users. This ordering pattern has fulfilled the MoQ requirement and has also kept the risk of both lost sales and excessive inventory to a minimum.

Also, it is recommended that future forecast operation shall be in the same way, that is, the managers provide their data separately, which is then analyzed and finalized at a later stage. It is expected to be an unbiased forecast by each manager and hence would help in refining the company’s existing forecasting systems.

#### 2. What operational changes would you recommend to Wally to improve performance?

There are three major operational changes which Wally shall perform in order to be more responsive to changing market trends, and hence be able to gain a larger percentage of market shares:

##### a. Incorporating customer’s voice at the designing phase

Currently, there is no authentic way in practice that can assure that the voice of the US customer is heard and responded to. All of the designing activity is based on intuition, gut feeling and perceptions that US customers are going to like, buy, and appreciate the same designs which were popular in the European market a season ago.

Focus groups, customer surveys, buying patterns of the previous season, analyzing customer’s buying patterns via statistical techniques, and analysis of competitor’s successful styles can be some ways in which the company can improve its designing phase which is certainly the base of all future operations.

##### b. Shifting manufacturing operations from China:

Most of the company’s customers are quality conscious, and the company is already facing a problem with manufacturers of cheap ski-clothing. Therefore, the strategic advantage can only be achieved if the company positions its products as premium brands. Exhibit 9A clearly shows that there is approximately a 3 percent difference in landed prices between products made in China and those made in Hong Kong.

However, the rejection rates (leading to raw material loss), import restrictions and negative perception about Made in China products are the key factors that indicate that Hong Kong shall always be the preferred site for manufacturing Sport Obermeyer products.

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