If Sport Obermeyer decides to produce all 10 styles in China initially the order quantities will differ as shown in the Table 5. style CV stability order with stability corrected stability
Order with corrected stability (Hong Kong)
Min. order quantity
Order
(China) expected coverage of forecast assault 0.27
3.71
1,632
3.71
1,712
1,200
1,712
0.7
seduced
0.28
3.61
1,588
3.61
1,666
1,200
1,666
0.4 entice 0.37
2.74
1,204
2.74
1,263
1,200
1,263
0.9
electra
0.38
2.66
1,170
2.66
1,227
1,200
1,227
0.6 gail 0.38
2.62
1,152
2.62
1,209
1,200
1,209
1.2
daphne
0.58
1.71
751
1.71
789
1,200
1,200
0.5 isis 0.62
1.61
709
1.61
744
1,200
1,200
1.2
anita
0.64
1.57
692
1.57
726
1,200
1,200
0.4 teri 0.69
1.44
635
1.44
666
1,200
1,200
1.1
stephanie
0.94
1.06
467 …show more content…
Each year, company’s success is determined by how they are successful to predict the market response to different styles and it was even getting harder since product variety and competition in the market were increasing. Due to the inability of precisely predicting retailer demand, Obermeyer faced two undesirable outcomes; the company either lost profit because of running out of most popular products or needed to sell the excessive stocks at very deep discounts in order to diminish the losses. The problem is Obermeyer could not get feedback from the retailers until Las Vegas Trade show, which started one month after Obermeyer started to production. In this case, Obermeyer should try to obtain the feedback and the past data about the demand. To do that, it would be recommended to implement an electronic data interchange program with retailers. When a retailer sells a product, Obermeyer would able to see what is sold in the retail store when. All retails would be linked to the Sport Obermeyer via this software and they could directly order for replenishments by submitting their orders. Since all data is stored in such a program, company would have sales data, observe customer behavior and predict new trends in advance. It would help to predict retailer demand more accurately and prepare better for the replenishment of the retail …show more content…
That is, sourcing different styles from both China and Hong Kong locations based on their demand uncertainty keeping the plant conditions as the criteria. Higher risk items are recommended to be produced at the Hong Kong plant because the items produced at this location will be produced quickly and of higher quality. It is also beneficial because a majority of the higher risk lines require smaller total quantity orders which Hong Kong is better able to produce because of their smaller unit requirements versus China (600 versus 1,200 minimum units, respectively). This means that the high risk items should be produced at Hong Kong including: Daphne, Isis, Anita, Teri, and Stephanie. The Gail line must also be produced at the Hong Kong plant because the total units forecasted is less than the required minimum production at the China plant. Production of styles such as Gail can be over produced. It has a lower COV and is less risky so production in China seems to make more sense at first assessment. However, because the minimum amount of 1,200 required for production in China exceeds the average forecast for Gail, or 1,017, it must be sourced in Hong Kong in order to not go over 20,000 items as specified by Wally. Therefore, all five high risk items and one low risk item should be produced at the Hong Kong plant. The remaining low risk items should be produced at the China plant including:
Order with corrected stability (Hong Kong)
Min. order quantity
Order
(China) expected coverage of forecast assault 0.27
3.71
1,632
3.71
1,712
1,200
1,712
0.7
seduced
0.28
3.61
1,588
3.61
1,666
1,200
1,666
0.4 entice 0.37
2.74
1,204
2.74
1,263
1,200
1,263
0.9
electra
0.38
2.66
1,170
2.66
1,227
1,200
1,227
0.6 gail 0.38
2.62
1,152
2.62
1,209
1,200
1,209
1.2
daphne
0.58
1.71
751
1.71
789
1,200
1,200
0.5 isis 0.62
1.61
709
1.61
744
1,200
1,200
1.2
anita
0.64
1.57
692
1.57
726
1,200
1,200
0.4 teri 0.69
1.44
635
1.44
666
1,200
1,200
1.1
stephanie
0.94
1.06
467 …show more content…
Each year, company’s success is determined by how they are successful to predict the market response to different styles and it was even getting harder since product variety and competition in the market were increasing. Due to the inability of precisely predicting retailer demand, Obermeyer faced two undesirable outcomes; the company either lost profit because of running out of most popular products or needed to sell the excessive stocks at very deep discounts in order to diminish the losses. The problem is Obermeyer could not get feedback from the retailers until Las Vegas Trade show, which started one month after Obermeyer started to production. In this case, Obermeyer should try to obtain the feedback and the past data about the demand. To do that, it would be recommended to implement an electronic data interchange program with retailers. When a retailer sells a product, Obermeyer would able to see what is sold in the retail store when. All retails would be linked to the Sport Obermeyer via this software and they could directly order for replenishments by submitting their orders. Since all data is stored in such a program, company would have sales data, observe customer behavior and predict new trends in advance. It would help to predict retailer demand more accurately and prepare better for the replenishment of the retail …show more content…
That is, sourcing different styles from both China and Hong Kong locations based on their demand uncertainty keeping the plant conditions as the criteria. Higher risk items are recommended to be produced at the Hong Kong plant because the items produced at this location will be produced quickly and of higher quality. It is also beneficial because a majority of the higher risk lines require smaller total quantity orders which Hong Kong is better able to produce because of their smaller unit requirements versus China (600 versus 1,200 minimum units, respectively). This means that the high risk items should be produced at Hong Kong including: Daphne, Isis, Anita, Teri, and Stephanie. The Gail line must also be produced at the Hong Kong plant because the total units forecasted is less than the required minimum production at the China plant. Production of styles such as Gail can be over produced. It has a lower COV and is less risky so production in China seems to make more sense at first assessment. However, because the minimum amount of 1,200 required for production in China exceeds the average forecast for Gail, or 1,017, it must be sourced in Hong Kong in order to not go over 20,000 items as specified by Wally. Therefore, all five high risk items and one low risk item should be produced at the Hong Kong plant. The remaining low risk items should be produced at the China plant including: