| Write-up of the Case # 1:Sport Obermeyer| | Case discussion questions 1. What is the lead time for production of skiwear? What are the factors that contribute to lead times being so long? What are the operational and competitive results of these long lead times? The lead time for production of skiwear is 10 months from Obermeyer places the first production order with Obersport from Nov 92 (order’s placement) to finished goods are delivered to retailers for 93-94 line on Aug 93 (order’s receipt), taking form Table 2-14, “Raw Material Sourcing and Production” paragraph in page 69, and Table 2-15.
The factors that contribute to lead time being so long are the following: * The long lead times of nonstandards zippers made in Japan (? 90 days). * The long lead times of dyeing subcontractors (45-60 days). * The long lead times of printing subcontractors (45-50 days). * The available capacity for full-scale production could be improved (Sport Obermeyer produces near to 200,000 units each year, the maximum production capacity at all factories for cutting and sewing is 30,000 units per month: it takes around 7 months).
These long lead times have negative operational and competitive results because if the time in raw material sourcing and production stages was reduced, Sport Obermeyer could ships all of its products from China by ship and not by airplane before the available quota permitted by United States government for this product category being fully used. Of course, the reduction in these costs would give a competitive advantage to Sport Obermeyer because the product price could be reduced. 2.
The company has just realized that they can use differences in individual forecasts made by members of the buying committee to estimate the standard deviation of demand for various products, styles, and colors. How are they able to use this information to make better production decisions? Wally did the data collection and analysis for the forecast and demand from previous year, he found that the standard deviation from the demand was almost twice the standard deviation of Buying Committee forecasts. 3.
Aside from making better use of available data, what other operational changes might you suggest to Wally to improve performance? Increase the operational capacity for cutting and sewing in the full-scale production, because currently they are making 30,000 units per month. The new factory located in Lo Village could be establish with a new focus training the workers to enhance their manufacturing skills, looking for a similar level than Hong Kong, for example: applying SOP (Standard operating procedure). 4.
What are the pros and cons about producing in Hong Kong? In China? How does this sourcing strengthen them competitively? How does it weaken them? | Pros| Cons| Competitively*| | | | Strengthen| Weaken| Hong Kong | * Workers worked 50% faster than Chinese counterparts. * Better quality | * Wages of manpower is higher. | * Differentiation is comparatively easier to get| * The cost leadership is harder to get because is more expensive| China| * Wages in China were much lower than in Hong Kong. * Longer production lines in China led to greater imbalance in lines * Problems related with quality and reliability of the operations| * Cost leadership is comparatively easier to get from the point of human resources| * Cost leadership is weaken because operative costs related to imbalance in lines| * Based in competitive strategies proposed by Michael Porter. | 5.
Using the sample data given in Table 2-20, make a recommendation for how many units of each style Wally should make during the initial phase of production. Assume that all of the 10 styles in the sample problem are made in Hong Kong and that Wally’s initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial analysis. ) Due to comparing different kind of individual forecast the sequence for the standard deviation we separated the demand of the products.
For example, A, B, C type of products, like A is the most popular product, B is the normal demand; C is the products with low demand. So that they can focus to solve the problem of frequently run out of the most popular items. 6. How should Obermeyer management think (both short-term and long-term) about sourcing in Honk Kong versus China? Objective: Competitiveness (Cost leadership and differentiation).