SporL Cbermeyer Case

1 Pow many lLems should Wally Cbermeyer order durlng lnlLlal phase of producLlon?
1he maln problem of Cbermeyer company ls LhaL Lhey have Lo deal wlLh unpredlcLable demand Lo some
polnL ln Llme (before Lhe Lrade show ln Las vegas) and llmlLed producLlon capaclLy afLer LhaL polnL We
can see how dlfflculL ls Lo predlcL demand from Lhe daLa ln glven ln Lhe exb3 Lhe lnlLlal forecasL for
parka A was 2300 unlLs whlle Lhe acLual season sales conslsL only 310 unlLs lL means LhaL Lhe mlsLake ln
Lhe lnlLlal esLlmaLlon made up for 490! 8uL updaLed forecasL lncorporaLlng 20 of demand was
lmproved Lo 373 unlLs 1haL ls why Wally Cbermeyer should very carefully Lhlnk abouL Lhe lnlLlal order
Pe should Lake lnLo conslderaLlon several reasons Lwo mosL lmporLanL of Lhem are Lhe followlng
rlsk of overesLlmaLlng/underesLlmaLlng demand for each model
relaLlonshlp beLween order slze and average forecasL for each model
Pe may use Lhe formula for slngleperlod lnvenLory model Lo esLlmaLe how many unlLs of each
lLem Cbermeyer should produce
Cu/(Cu+Co)
We know LhaL expecLed proflL for each parka ls 24 and expecLed loss ls 8 from Lhe wholesale
prlce lor 8ococo parka Lhe proflL ls 27$ and losL ls 9$
27/(27+9)
073
Z(073)07734
CrderAverage lorecasL + z x 2sLdev
SLyle Average lorecasL 2 SLandard
uevlaLlon
Crder

8ecommended
lnlLlal Crder
Call 1017 388
lsls 1042 646
LnLlce 1338 496
AssaulL 2323 680
1erl 1100 762
LlecLra 2130 807
SLephanle 1113 1048
Seduced 4017 1113
AnlLa 3296 2094
uaphne 2383 1394
1oLal

2 1he maln purposes of operaLlonal changes are Lo swlLch from speculaLlve Lo reacLlve producLlon
and decrease lead Llme on all sLages of producLlon l can recommend followlng operaLlonal
changes
produce lLems wlLh less varlable demand durlng Lhe lnlLlal sLage of producLlon (producLs for
boys glrls and preschoolers producLs for segmenLs orlenLed Loward cllenLs wlLh less
sophlsLlcaLed LasLes less fashlonorlenLed such as lred" Lype from adulL male cusLomers
segmenL (lL ls descrlbed as 1he mosL conservaLlve had a Lendency Lo buy baslc sLyles and
colors")
change relaLlonshlp wlLh reLallers propose Lhem a dlscounL for early order
use subconLracLors for producLlon durlng Lhe Llme afLer Lasvegas show Lhe purpose ls Lo
lncrease Lhe producLlon capaclLy Lemporarlly Lhen Lhe demand ls known on Lhe sLage of
reacLlve producLlon
produce
3 lrom Lhe shorLLerm polnL of vlew Cbermeyer managemenL should use boLh producLlon
faclllLles ln Chlna and ln Pongkong lL ls