To understand what operational changes we could recommend to Wally first we have to analyse external and internal factors, which are leading to company problems. The world of fashion is unpredictable and has a short life-cycle and in the fashion skiwear business, which is extremely competitive as all fashion industry, demands is highly dependent on a variety of factors that are difficult to predict. There are only two months long of peak of the retail-selling season (December-January) on ski-wear business.
Small delays in delivery time can cause big financial losses. In this case we have problems with forecasting that involves wrong production and lead to missing sales opportunities, overstock, and loosing money. The company face a “fashion gamble” each year manufacturing in advance, before market response, knowing that market trends may change in the meantime. They have relatively straightforward cycle (design the product, make samples, shows samples to retailers, place orders to produce, receive retail orders, eceive goods in the distribution centre and then ship them to retailers).
They have to develop a more complex supply chain, which would provide to reduce manufacturing cost. If reduce the lead time it might help the company react rapidly to market demands and reduce the needs for sedulous forecasting by several months ahead of delivery to retails. Supply chain changes have to focus on keeping raw materials and factory-production capacity undifferentiated as long as possible. Company can re-design its line to reduce the variety of zippers they are using.
Using one color in several lines as a fashion element therefore introducing the color contrasting to the style and keeping them in stock. This change will help to make the total product combination smaller and more profitable. This change will reduce delivery lead-time by more than 60-90+ days (for the zippers they are receiving from YKK) The company have to choose their most largest and important retail customers to provide them a sneak preview of the new annual line and to place their orders sooner.
Maybe it is expedient for Obermeyer if some clients (actually who take a decision about collection which will be in their retail centre) from the biggest retail companies to participate in choosing new design and materials for next year. It’s curious that if the company will produce products in China and then transport them by air it will be for example 3$ (based on Exhibit 9B for Rococo Parka) cheaper than producing in Hong Kong and sending through ocean carrier.
They should place stake on Lo Village factory and focus on workers skill level, training and cleanliness. Based on Exhibit 10 in the case The recommendation to Wally to produce the items with minimum standard deviation foremost in order to postpone manufacture of unpredictable items closer to the selling period until they have some market signals such as response after fashion show, after updating the initial forecast with early demand information, to help correctly match supply with demand.
Due to reducing mismatch costs the company has opportunity to lower prices. Wally is recommended to produce (Q-ty=Av. Forecast-2*Std. Deviation) such styles as Assault, Electra, Seduced and Anita at first instance in China and everytime do it with items the divide between Average Forecast and 2*Std. deviation are above 1,200 (as 1,200 units in same style the minimum order quantity for China) and send through ocean carrier. Postpone the manufacturing (until market response or result of Vegas show) of unpredictable items such as Isis, Teri, Stephanie.
The items which small standard deviation but in the same time with average forecast less than 1,200 should be produce in Hong Kong also at first instance and send by freight. This recommendation for minimising the risk of overstock but in the meantime the company has to be ready to multiply production for styles that have high enough sales levels. In future the company have to negotiate with Hong Kong factory to minimise the quantity of production of each style.