TABLE 2.12 TRANSPORTATION COSTS PER UNIT PRODUCT Warehouse fabound eike TABLE 2-13 TRANSPORTATION COSTS PER UNI §M CENTRALIZED SYSTEM werenouse Atlanta Boston Chicago atlas” Low angeles 3 14 oe 1 13 i 8 " 5 ‘ & 8 i ‘5 5 ie i 7 16 ® z Table 2-12 (see the column “Inbound”). Table 2-12 also provides information about trans portation cost per unit from each warehouse to the stores in its market area (see the column ‘Outbound”). Finally, Table 2-13 provides information about transportation casts per unit product from each existing regional warchouse to all other market areas, assuming thi warehouse becomes the central warehouse. . Suppose you are to compare the two systems for Product A only; what is your recom- mendation? To answer this question, you should compare costs and average inventory levels for assuming demands occur according to the historical data, Also, you should determine which regional warchouse will be used as the centralized warehouse It is proposed that in the centralized distribution strategy, that is, the one w warehouse, products will be distributed using UPS Ground Service, which guarantees that products will arrive at the warehouse in three days (0.5 week). OF course, in this c portation cost for shipping « unit product from a manuf: increases. In fact, in this case, transportation costs increase by SO percent, Thus, for instance shipping one unit from the manufacturing facility to Atlanta will cost $18.Would you recommend using this strategy? Explain your answer ee ee TTT CASE: Sport Obermeyer morning in 1992; Wally paused! for just a moment Wo savor the fresh air and beauty of the sur before closing the door cluring facility to the warehouse rounding mountains Aspen, Colorado behind him, Wally Obermeyer deftly balanced his office keys and a large printout of forecasting data as he heeled his mountain bike through the front sic. capmig © ica os entrance of Sport Obermeyer’s headquarters in Harvard Colle pists sm sty tls ls Aspen, Colorado. It was a crisp November ani Anavh Raman of Harvord bythe—— —_—_—_— 64 DesiGnina AND MANAGING THES i aye permeyer a fashio iN 10 se ny would offer in the KIC The task required carefully year’s line nalysis, experience, intuiti ming Sport Obermeyer would blending ind sheer. informerion about how the market would react to emerged about how end-consumers were responding to the company’s current 1992-1993 line. Despite the attraction of waiting for market information. Wally knew that further procras- tination would delay delivery to retailers and that late delivery would reduce the exposure consumers would have to Obermeyer products. As usual, Obermeyer’s new line offered strong designs, but the ultimate success of the line was highly dependent on how well the company was able to predict market response to different styles and colors. Feedback from retailers on the 1993-1994 line wouldn't begin to surface until the Las Vegas trade show next March, Jong after many of Obermeyer's products had entered production. Wally mused: How sppropriase that our fare is always determined in Las Vegas. Like most fashion apparel manufacturers; we face a “fashion gamble” euch year. Every fall we start manufacturing well in advance of the selling season, knowing full well that market trends may ange in the meantime. Good gamblers calculate the dds before putting their money down, Similarly, libether we win or lose the fashion gamble on a pat= ticular ski parka depends on bow accurately we pretict ach parka’s salability Inaccurate forecasts of retailer demand had become a growing problem at Obermeyer; in recent years greater product variety atid more intense competition had made accurate predictions ireasingly difficult, Two scenarios resulted th painful. On one hand, at the end of each “eason the company was saddled with excess ae for those styles and colers that ret, cree aechased: styles with the WOESt ge eords were sold at deep discOUnts, often ya (elon their manufactured cost. On the other hays the company frequent ran out ofits mOst pony iterns; although popular products were cle desirable, considerable income Was lost each ye. hecause of the company’s inability to predia which prouducts would become best-sellers, Wally sat down at his desk and reflected on jy results of the day-long “Buying Commitice meeting he had organized the previous day. Ths year Wally had changed the company’s usagi practice of having the committee, which comprised six key Obermeyer managers, make production commitments based on the group's consensus, Instead, hoping to gather more complete information, he had asked each member independently to forecast retailer demand for each Obermeyer product. Now it was up to him to make use of the forecasts generated by the indi- viduals in the group. He winced as he noted the discrepancies between different committer members’ forecasts. How could he best use the results of yesterday's efforts to make appropriate production commitments for the coming year’s line? A second issue Wally faced was how to allocate production between factories in Hong Kong and China, Last year, almost a third of Obermeyer’s parkas had been made in China, all by mdependent subcontractors in Shenzhen. This year, the company planned to produce half of its parkas in China, continuing production by sub- contractors, and starting production in a new plant in Lo Village, Guangdong. Labor costs in China ere extremely low, yet Wally had some concerns about the quality and reliability of Chinese eae He also knew that plants in China init ee larger minimum order cubic ahah. these in Hong Kong and were “Ject (0 stringent quota restrictions by the U.S. Bovernment. How should fhe incorporate all of these differences into a w a ded desisi about where to so ell-founded decision urce each product’? had ne ly —_Cry ing el] avon Wan, New Territories, Hong Kong ¢, managing director, Obers gaymond Tse FSpor eipated, was anxiously awaiting Sport Obeimeyers Lijers for the 1993-1994 line. Once the ater oF wed, he would have to translate them. quickly aif requirements for specific components and then 8 with vendors, Ain delay would cause problems 2 appropriate component ory increased srecaure on his relationships with vendors, oventime ‘his or his subcontractors’ factories, or even late very to Sport Obermeyer sport Ltd. was a joint venture established ‘985 by Klaus Obermeyer and Raymond Tse to erdinate production of Sport Obermeyer sroducts in the Far Bast, (See Figure 2.15, Bpersport was responsible for fabric and component sourcing for Sport Obermeyer’s entire production in the Far East, The materials were yen cut and sewn either in Raymond Tse’s own Aipine” factories or in independent subcon- ath delivery NVENTORT MANAGE AND Ree hots 65 Hong Kong as well as a rece its Plants in facility in China, Sort Ohera Fesented about 40 duction voli ¥ established hermeyer's ord D percent of Alpin rep. ‘annual pro. Lo Village, Guangdong, c hond Tse and his cousin, Shiu Chuen Tse ed with pride and delight at the recent Completed factory complex. Located. ame wide expanse of rice paddies at the perim Lo Village, the facility would jobs, housing, and recreati than 390 workers. Th dircet investi China Shiu Chuen had lived in Lo Village alt of his life—the Tse family had resided there for erations, Raymond’s parents, former landowners eventually provide onal facilities for more facility was Alpine's fr i in manufacturing capacity in port's ner ECONOMIC ZONED) cH FIGURE 2-15 Map of fa \\ vaginas \ soum cities (Horo Kono arena uugtens Pope I and Guangdond)-if 86. bcs1axin ane Manacing THe sUPRLY inthe village, had moved io Hong Kone before Raymond was born, returning to the villa eve oung bo len Raymond was a yc veral years when Ri ig bo during the Japanese occupation of Hon Kong im World War Ik In 1991 Raymond Tos advised to Village forte fis in ones 40 yeas, The thei personaly al seing Raymond, hey oped to convince him to bring some of his wealth and managerial talent to Lo Village. After discussions with people in the community, Raymond decided 10 build the factory, so far inv million in the facility Working with Alpine's Hong Kong ma ‘agement, Shiu Chuea had hired 200 workers for the factory's first full year of operation. The workers had come fom the local community as well as distant (owns in neighboring provinces; most had ‘ow arrived and we ning in the plant. Shiu ‘Chuen hoped he had planned appropriately for the orders Alpine’s customers would assign to the plant a; planning had been difficult since demand, worker skill levels, and productivity levels were all hard to predict ‘SPORT OBERMEYER, ITD. Sport Obermeyer's origins traced in 1947, when {Glaus Obermeyer emigrated from Germany, tothe United States and started teaching at the Aspen Ski School. On frigid, snowy days Klaus fored tnany of his students cold and miserable due to “Pprictical ‘clothing they wore—garments both less protective and less stylish than those skiers wore in his ative Germany, During summer months, Ka to Germany to find durable, high ¢lothing and equipme began to travel heh perfomance sk nt for his students, Ay fnsineer by tmining, Kiaus also dee roduets; he wax Credited with making the first E00se-down Vest ou of an old dome comforter, f example, in the 1980s. nthe early Too pepe Ularized the “Ski brake:* ren cumbersome “run. erect share ofthe children's skiwear mat and an 11 percent share of the adult ski’ market Columbia Sportswear Was a lowergne volume-per-style competitor whose salge increased rapidly during the previous three year By 1992 Columbia had capuured about 23 pean of the adult ski-jacket market Obermeyer offered a broad line of fashion sy apparel, including parkas, vests, ski suits, shell ski pants, sweaters, turtlenecks, and accessorie: Parkas were considered the most critical desig component of a collection; the other garmeny were fashioned to match their style and color. Obermeyer products were offered in five different “genders”: men’s, women’s, boys’, gil" and preschoolers’, The company segmented each ‘sender” market according 0 price, type of skier, and how “fashion-forward” the market was, Fot example, the company divided its adult male customers into four types, dubbed Fred, Rex, Biege, and Klausie. A Fred was the most con : arte acing of pack bow ee with vibe stitching (x2). Jan front and back shoulder seam wt visio stitching (4). Close side seam with invite stitching, match seaming (8). Three-stich overock the side seam. ‘Sew sieeve opening, bottom hem with invisible stitching. imvsitie stitch front placket seam, than 1/4” double top-stitch the placket seam. Invieble stich the sleeve seam (>4); invisible stitch sleeve panel seam, sew pleats at sleeve panel ) the x wisible-stitch bottom and sleeve opening, leave g seam (x2), 4/4 double top stitch raglan sleave seam and sleeve panel seam (6). Single locksttchragian sieeve seam and sleeve pane! seam, double siltch the center of sleeve panel seam (x6) Invisible ston the armnole seem (%<2), match the notch of armhol Double sttch armhole seam (X2). nota je lockstitch 1a So oe sen sleeve seam and sieeve panel seat, double stitch the center of sleeve panel Single lockstitch to lose bottom hen facing (>1), insert the drawstring to bottom hem, 'nservsew elastic 1 sieeve opening (x2), lovisibie stich sleeve opening, close bottom of collar, insert belt loop, change ‘Sew col ( recite fi (1), imisible stitch tne collar top, SeW the inside packs! Sat front acing with 1/16" anos ar eee! tt, Pocket a : 16" eck 4 with Velero Tree-sttchoverlock ining pec mie es at right. 116 edge-sichi ing (x1), Sew Sete ttlching athe tring te Salonga the lning body roulder ad (<2) c