Q #1. Where would you place production?
Although the article argues that they intended to place about half of its all production to China, I would personally shift more than half of its production toward Hong Kong if you are talking about the current market. I’m not quite sure if it’s about population of skiers/snowborders, but apprently a number of ski resorts went out of business in the past decade and we are faced with the “global warming”. Obviously we have less snow than before and because of that the winter sport season has been shortened as well. Kids nowadays are surrounded by many different types of technology entertainment (e.g., mobile phones, tablets, computers, video games) other than skiing/snowbording.
All these trends suggest that mass production for generally acceptable ski garments for mid-class people is no longer effective. Since it seems that apparel production relatively takes a long lead time, they should make every effort to shorten its production cycle to serve the rapid-changing trends and diverse tastes of the current market. In the article, it says the Hong Kong facility produces faster than China, so they should make every effort to make their HK production to be even more effective at producing a smaller amount at a much faster pace, so that they could make more profit by observing the reaction from the market at the initial sales of the season.
Q #2. What improvements would you implement over the next five years? Q #3. What do you think would lead to the highest margins at Sport Obermeyer?
As mentioned on the Q1, I think they should focus on fewer items to reduce loss from unsold items which is caused by scant sales/trend forecasts. They should become better at 1) securing key raw materials in sotck to deal with unexpected additional/fluctuated orders, at 2) forcasting customers’ trends and producing based on more accurate forecasts, and at 3) cutting down the produciton lead time by using more flexible fabric suppliers (with more lenient minimum order conditions).
They obviously need to keep producing a good number of ski gears for basic models/colors that expects to sell well, but can try to minimize the production size of thier marginal product lines. If their production cycle gets shortened and become much more order-based, they would become more comfortable with lower stock of ski garments in general and have more time to observe and analyse the market trend and adjust thier production level to it. It could make a huge difference how they sell thier products and make less lost sales for sure. They should also use a few different large material suppliers that can be more flexible with minimum order restrictions instead of relying on smaller-sized, less flexible suppliers who seem to have been limiting Sport Obermeyer’s production ability to resond to the market in a timely manner.
Production cycle in the apparel industry is longer than, for instance, food industry (obviously!) but Obermeyer’s cycle looks absolutely too long to keep up with the recent fashion cycle which is very quick. Unless the company tries very hard to fill the gap, trend/demand forcasting of the compnay will never be accurate enough and designers would also suffer from that. In a word, they could try to be ZARA in the ski garment space in the sense that their production cycle becomes shorter and more efficient than before, and as a result their product life cycle becomes also shorter. In terms of thier supply chain strategy, it doesn’t make too much sense to me that they have to transport/store final products in their distribution center in Denvor, which is far from the west coast.
In stead, it may make more sense to build up a new distribution center in Seattle and dispatch products from there. That way they could reduce the initial transportation cost. This new center could be much smaller than the current one in Denvor if they shift their inventory management to low-stock/order-baesd production.
In short, thier 5-year objective should be 1) low-stock production management with more flexible suppliers, 2) quicker, smaller-amount production, 3) faster distribution channel, 4) more market-driven — If they succeed in all these areas, their positioning in the market should be much more competitive. In the current rapid-changing fashion industry, forecasting the demand and placing production orders more than a year prior sounds too risky. Instead of trying to be a better forecaster, they should make efforts to become much faster at responding to the market in term of what/how much to produce/sell. Winthin the next 5 years, they might as well attempt to significantly reduce their lost sales, which could naturally occur based on succeeding on launching more efficient/quick-responding production system. And obviously, these changes would bring more profit to the company.