# Sport Obermeyer Case Analysis

2030 WordsOct 7, 20099 Pages
There were two main driving issues behind our analysis of this Sport Obermeyer case: the measurement and understanding of demand from uncertain and disparate forecasts, and the allocation of production between factories in Hong Kong and Mainland China (Lo Village, Guangdong). The main challenges facing the company were long lead times, little to no feedback from the market before the first production decision (the first real demand signal is at the Las Vegas trade show in March) and inaccurate forecasts along with the lost profits that can result. The first part of our analysis involved deriving an order policy from the forecasts provided in the sample problem. We solved this problem using simplifying assumptions and then relaxing some of…show more content…
Since the expected standard deviation is twice the standard deviation of the forecast samples, we can find the proportion of the time that the actual value of demand will be within a certain range. Because of our k value, our orders are all around 1 standard deviation below the mean, meaning that about 12% of the actual observations will fall below these orders. In that case, Sport Obermeyer would lose money based on the extra units. If demand falls less than 600 units above the initial order, we have a similar problem in the second ordering stage - Obermeyer cannot effectively adjust its order size to fit the reevaluated demand. Based on the cost of each item, which we ignored in our analysis, we could calculate the expected over-ordering from each item and find the ideal level, similar to the outside analysis that we found. The second main issue to consider is whether to source in Hong Kong or China. Sourcing in Hong Kong provides Wally more flexibility because its minimum order quantity is 600 units compared to 1,200 units in China. The ability to order fewer units allows Wally to order units in a less risky manner. In either case Wally orders combinations of products so that he minimizes the chance he'll order too much of any one product. Lower minimum order quantities allow Wally to order lower amounts of more products. Since he believes he will sell many of each product, enough to cover the minimum order cost, Wally can lower