Obermeyer: Case study

Résumé du document

When we conducted our work, we identified that the main problem of the company was the difficulty to forecast accurately its sales for the next season and this uncertainty, even if it can be reduced, will always remain. Thus, our main objective in this case study was to find a way to reduce the inaccuracies in Obermeyer's forecasting process by using the new vendor model and by this mean reduce the cost of forecasting errors for the company. For the production planning and the choice of production locations, we followed the approach of Obermeyer's CEO, of intuitive but logical and limiting the risks for the company. Our calculation allowed us to distinguish two production periods in the company's production planning, the first period before Las Vegas trade show and the second one, introducing the trade show's feedback. Regarding the fact that we considered that running out of products would be more damageable for the company than having unsold items at the end of the season, we offered in our approach two supplementary months to Obermeyer's former planning period to address any supplement orders or problems.

Extraits

[...] Besides by doing those bulk orders we had to lower our production quantities increasing the risk of being out of stock for some products but we underestimated the fact that the loss would be lower when having unsold products than when running out of products. By using computing calculation, we would have been able to calculate optimal loss due to unsold products or due to running out of products. Obermeyer forecast is entirely depending on intuitive forecasts. Even if these forecasts are made by professional, a single error could have completely modified the production of one parka. [...]

[...] Reducing lead times enable the company to reduce production risk by delaying production commitments until more comprehensive market intelligence can be gathered. We observed in the case that Obermeyer's production process was suffering from high supply delays which increase the costs for the company. In order to deal with this issue, we came up with some recommandations: Establish CRM with retailers to produce continuously and efficiently Use air shipping to meet peaks of demand in January and December In overall define principal levers of lead times and make the best to reduce them. [...]

[...] RECOMMANDATIONS - On the issue of product diversity - On the supply delay issue V. LEARNINGS - Calculation problems in the production planning - Our approach Introduction When we conduct our work, we identified that the main problem of the company was the difficulty to forecast accurately its sales for the next season and this uncertainty, even if it can be reduced, will always remain. Thus our main objective in this case study was to find a way to reduce the inaccuracies in Obermeyer's forecasting process by using the news vendor model and by this mean reduce the cost of forecasting errors for the company (inventory costs, cost of selling the remaining items of the collection at the end of the season ) For the production planning and the choice of production locations we followed the approach of Obermeyer's CEO: intuitive but logical and limiting the risks for the company. [...]

[...] This calculation allowed us to obtain the cost incurred by the inaccuracy of forecasts. We can see the following table the possible reduction of costs that Obermeyer could realize by increasing its expected profit with more accurate forecasts. IV. Recommendations i. On the issue of product diversity As we have shown before, the forecasting difficulties of Obermeyers' Buying Committee are strongly related to the large variety of products that the brand has and to the nature of the products itself. [...]

[...] This particularity is making the forecasting process difficult But another challenge for Obermeyer is to predict a demand which is very uncertain due to the nature of its products itself: Obermeyer business is a highly seasonal business, and their products have a short term life. The main selling season lasts only two months. Obermeyer business is highly dependent on trends and fashion which are very unstable and hard to predict in advance. The growing number of choice leads to a growing number of stock keeping units and also less production for each type of parka. [...]