Queen’s University MBA MBAS 841 – Operations ManagementProfessor Paul RomanTeam Brief #6May 17th, 2018Team 348 MEMOTo: Wally ObermeyerFrom: Team 348Date: November15 1992Subject: Forecasting and Sourcing for Sport Obermeyer Ltd.In light of the inaccurate forecasting in years prior, Wally, Sport Obermeyer’sVice President is tasked with forecasting what skiwear styles, colours, and volumes will be sought out byretailers and customers in the coming year. Prior mispredictions have led to too much or too little inventory, and, as such, Wally has decided to break the tradition of gaining consensus by asking each member of the 6 key Obermeyer managers to independently forecast the coming trends.
Noting differences among the forecasts received, Wally is faced with both utilizing the findings from each manager to make an accurate production commitment for the first half of Obermyer’s projected demand for the 1993-1994 season and allocating production between Hong Kong and China.Factoring in variances among labour costs, quota restrictions, quality and reliability in both Hong Kong and China, Wally must consider all aspects in his decision-making process.ISSUES Discrepancy among Buying Committee’s forecasts. Previously decisions were made through panel consensus, which can lead to unreliable data when factoring in hierarchical roles. With inaccurate forecasts as a growing problem Wallyaims to rely on data. However, discrepancies amongratings from six key Obermeyer managers have led to uncertainties regardinghow to proceed with commitment for theprojected demand for 1993-1994.Tradeoffs in production costsin Hong Kong and China.
Workers in Hong Kong have a broader set of skills, derive two times as much output in a given period, produce higher quality and more reliable products when compared to workers in China. However, Chineselabour rates are approximately 96% lower than Hong Kong. While Obermeyer has been trending towards an increased production in Chinaas a result of the low production costs,Wally must consider howgovernment quota for imports and minimum order size per style will impact inventory management and variety of styles offered. Declining number of styles.Recent years have demanded greater product variety.
Sport Obermeyer’s number of styles offered has been trending downwards from 1987/1988 and has remained flat in recent years.RECOMMENDATIONSDerive best sellers based on the smallest standard deviation of cumulative forecasts. Considering that forecast accuracy has proven to be correlated with agreement among the Buying Committee, it is recommended that Wally…. order the average number of coats for those with low deviation from the mean.
In this case, this would include ordering….. (pg. 455)Produce X amount in Hong Kong and x amount in China. Complete Linear programming, pg.
385Move from made-to-stock to made-to-order. (pg. 271)Move to continuous replenishment.
By establishing electronic data interchange (EDI) with retailers, Obermeyer can electronically be informed of demand. Obermeyer can use this information to forecast future demand and determine what products require replenishment based on upper and lower inventory limits established. As a result, retailers save on costs and would be more willing to offer a variety of products. We are available to meet with you and discuss these recommendations in more detail at your discretion.Sincerely, Team 348