Issues
• Question: What are the issues driving this case? – How to measure demand uncertainty from disparate forecasts
– How to allocate production between the factories in Hong Kong and China
• How much of each product to make in each factory
2
Describe the Challenge
• Long lead times:
– It’s November ’92 and the company is starting to make firm commitments for it’s ‘93 – 94 season. • Little or no feedback from market
– First real signal at Vegas trade show in March
• Inaccurate forecasts
– Deep discounts
– Lost sales
3
Production Options
• Hong Kong
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• Mainland (Guangdong, Lo Village)
More expensive
Smaller lot sizes
Faster
More flexible
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Cheaper
Larger lot sizes
Slower
Less flexible
4
The Product
• 5 “Genders”
– Price
– Type of skier
– Fashion quotient
• Example (Adult man)
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Fred (conservative, basic)
Rex (rich, latest fabrics and technologies)
Beige (hard core mountaineer, no-nonsense)
Klausie (showy, latest fashions)
5
The Product
• Gender
– Styles
– Colors
– Sizes
• Total Number of SKU’s: ~800
6
Service
• Deliver matching collections simultaneously • Deliver early in the season
7
The Process
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Design (February ’92)
Prototypes (July ’92)
Final Designs (September ’92)
Sample Production, Fabric & Component orders (50%)
Cut & Sew begins (February, ’93)
Las Vegas show (March, ’93 80% of orders)
SO places final orders with OL
OL places orders for components
Alpine & Subcons Cut & Sew
Transport to Seattle (June – July)
Retailers want full delivery prior to start of season (early
September ‘93)
– Replenishment orders from Retailers
Quotas!
8
Quotas
• Force delivery earlier in the season
• Last man loses.
9
The Critical Path of the SC
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Contract for Greige
Production Plans set
Dying and printing
YKK Zippers
10
Driving Issues
• Question: What are the issues driving this case? – How to measure demand uncertainty from disparate forecasts
– How to allocate production between the factories in Hong Kong and China
• How much of each product to make in each factory
• How are these questions related?
11
Production Planning Example
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Rococo Parka
Wholesale price $112.50
Average profit 24%*112.50 = $27
Average loss 8%*112.50 = $9
