Analysis:

The case is about the speculation and wrong forecasting of products by the Sport Obermeyer which
is a high end fashion skiwear designer and merchandising company. It describes about the issues
faced by the company such as long lead times, intuition and sheer speculation, improper feedback
and communication with retailers and inaccurate forecasts of retailer demand. Due to inability to
predict correctly the company was facing excess merchandising and losses. It describes about the
products, suppliers, and supply chain method used by the company.

Solution for Problem 1

In order to determine what items should be produced where, a risk assessment was conducted for
all lines per the average forecast for each line. The standard deviation was determined in order to
analyze the risk associated with each line. A benchmark of twice of standard deviation was used to
determine the associated risk. Any item with a standard deviation below 2 is considered a low risk
item while any item with a standard deviation higher than 2 is considered a high risk item.

It is assumed that first order placed must be at least 600 units per item in Hong Kong and 1,200 units
per item in China. The remainder of the average forecast will be made up in the second order. Here
in the process we have used the formula

Sum(Average Forecast – K* Standard deviation) to find the total maximum quantity of products. Here
the production commitment is 1000

so Sum (Avg forecast – K * Std) = 10000. By using trial and error method we got k=2 Following given
in exhibit 10.

Style Average Forecast Standard deviation 2 x Standard Deviation

Gail 1,017 194 388

Isis 1,042 323 646

Entice 1,358 248 496

Assault 2,525 340 680

Teri 1,100 381 762

Electra 2,150 404 807

Stephanie 1,113 524 1,048

Seduced 4,017 556 1,113

Anita 3,296 1,047 2,094

Daphne 2,383 697 1,349

Here we will subtract 2 Standard deviation from average of each line because the average forecast is
used to determine the final solution.

Average Forecast Standard deviation Average- 2*SD Hong kong

1,017 194 629 629
1,042 323 396 600
1,358 248 862 862
2,525 340 1845 1845
1,100 381 338 600
2,150 404 1342 1342
1,113 524 65 600
4,017 556 2905 2905
3,296 1,047 1202 1202
2,383 697 989 989

Here the total average forecast is 20000 but our first commitment is 10000 so K=2 we got above
forecasted quantities to be produced by Hong Kong and China.

At the Hong Kong plant, there is a minimum of 600 units required per line produced. For this reason,
the initial quantity for the Daphne, Isis, Teri, and Stephanie lines would need to be increased to meet
this requirement for the first order.

Changes

Reducing number of styles handled and to predict customer demand for individual style.

To create promotion strategy to persuade retailers to order.

PRODUCTION SYSTEM

• Increasing production Quality of China to be closed to Hong Kong.

To reduce lead time of production especially the preparation of raw materials

• Increase bargaining power with suppliers by ordering via big supplier that can commit on
timeline

• Collect stock raw materials which is base on Ski cloth production