Sport Obermeyer
Managing Product Variety & Short life-
Cycle Product in a Global Supply Chain
Question 2A
Consider the two production period situation (one before Las Vegas Show and the second one after Las Vegas Show). Consider the first production period.
How would you decide which style (Parka) to produce?
How would you decide how much of each style to produce?
Indicate the factors & rules that you would use in determining which and how much of the styles that Wally should make during the initial phase of production.
Answer:
We have to take into account the following information:
- At the time the decision has to be made, there is no sales information available.
- Orders from the past don’t give any useful information since all products are new in the fashion market. Each new product in this market has a great chance to fail or succeed. So great volatility.
- Trend watching gives the best indication what the market demands.
- Only the 10.000 units for the first order have to be determined. The other 10.000 units can be ordered after the Las Vegas fashion show.
In this stage with less information available, all supportive decision information is useful. One of the available information sources is the “sample buying committee forecasts”. Based on the Standard Deviation information, we’re able to forecast the demand in a slightly reliable way. As Wally mentioned, SD of demand is twice the SD of the forecast per style. Looking at the following figure, the parka with the lowest percentage is the parka with the lowest volatility in demand according to the reasoning above.
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