scm reebok
Transcript of scm reebok
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BPT09002 Debraj
BPT09008 Arup
BPT09014 Vikrant
Bpt09020 Abhishek
Reebok NFL Replica Jerseys:
A Case for Postponement
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Reebok Background Small British shoe company when J Foster
invented spiked running shoe.
1894 His grandsons formed Reebok (African
antelope) which absorbed the shoe company1958
Paul Fireman acquired North Americanlicense for selling Reebok1979 Reebok USA acquired Reebok British and Reebok
International went public1985 Reebok signed 10 years exclusive contract with NFL
for uniforms and other licensed merchandise for$250million2000
Acquired by Adidas for $ 3.8 billion @ $ 59 per share.
Market share of Adidas-Reebok jumped to 21% from9%2005 2
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National Football League- premier professional leaguefor American football
Most popular sporting league (USA Today)
Super Bowl- championship game. Highest TVviewership ratings & Ad spot costs
32 teams, each team- 16 games, total 256 games
2011-12 season-Opening game- 8th Sep 2011Super Bowl- 5th Feb 2012
About NFL
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NationalFootball League
(NFL)
(32)
AmericanFootball
Conference (AFC)
(16)
NationalFootball
Conference (NFC)
(16)
AFC
North
(4)
East
(4)
South
(4)
West
(4)NFC
North
(4)
East
(4)
South
(4)
West
(4)
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Baltimore Ravens
Cincinnati Bengals
Cleveland Browns
Pittsburgh Steelers
AFCHouston Texans
Indianapolis Colts
JacksonvilleJaguars
Tennessee Titans
SouthNorth
EastWest
Denver Broncos
Kansas City Chiefs
Oakland Raiders
San Diego Chargers
Buffalo Bills
Miami Dolphins
New England Patriots
New York Jets5
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Chicago Bears
Detroit Lions
Green Bay Packers
Minnesota Vikings
NFC SouthNorth
EastWest
Atlanta Falcons
Carolina Panthers
New Orleans Saints
Tampa Bay Buccaneers
Dallas Cowboys*
New York Giants
Philadelphia Eagles
WashingtonRedskins
Arizona Cardinals*
San Francisco 49ers
Seattle Seahawks
St. Louis Rams6
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All NFL Jerseys
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High margin & lucrative business
Risk associated with tying a product to an on-fieldperformance
Demand influenced by uncontrollable factors
Reebok developed expertise in Licensed Apparel by
acquiring LogoAthletic in 2001 which has experience &expertise in sports apparel as well as past relationshipswith NFL
Licensed Apparel Business
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Many number of teams Reebok has exclusive rights, no competition Customer demand fluctuates-
Driven by the excitement and passions feel for the game. One way to express their support is by adorning the jerseys of the favorites player
on the favorites teams.
Hot market demand- Hot market item (demand), is an item that was either not expected to sell well
before the season or an unknown item that had no prior sales expectations.
For example :
1. Some team that no one expected to do well gets off andthe team everyone expected to contend is losing games
2. Regular player become super star.
Demand for NFL replica jerseys
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Jersey with team colors and marking but without a playername or number
Purpose using blank jersey : Fill demand for the player that are order in small quantities To respond quickly to demand for popular player
Blank
Jersey
Jersey with the player name and number
Contract Manufacturer and Reebok have an agreedminimum order level of 1,728 units for the dressedjersey for any players.
Dressed
Jersey
Jersey
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Raw
Material
Suppliers
Contract
Manufacturers
Reebok
Warehouse
Retail
Distribution
Centers
Retail
Outlets
Consumer
2 -16weeks
4 - 8weeks
3-12 we eks 1 wee k
1-2 weeks or less 1 wee k
Normal Demand
Hot M arket Demand
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Fabric
Inventory
Cut, sew,
and
assembly
Blank
Inventory at
supplier
FG Inventory
Shipping
2 - 16
weeks
4
weeks4
weeks
Screen Printing
Screen
Printing
Blank Goods
Inventory
1
weeks
Contract Manufacturers (CM) Reebok (Indianapolis)
CM- El Salvador, Honduras, Guatemala
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Jan-Feb
Retailers get discount to place pre-season orders fordelivery in May
Feb-Apr
Limited ordering by retailers to re-balance stocks; some
short LT orders to respond to player movements
May-Aug
Retailers order to position stock in their stores inanticipation of season, and expect 3 4 week delivery LT
Sep-Jan
Retailers order to replenish stores, chase the demand, andexpect 1 2 week LT for Hot Market items
The sales cycle
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Purchase Planning
July-Oct
Reebok places orders on CMs for April delivery; primarilyorders blanks (~20% of annual buy)
Jan-Feb
Reebok places orders for dressed jerseys based on retailersadvance orders & remaining inventory (~ 15 20%) Reebokorders dressed & blank jerseys, based on forecasts andinventory targets
Mar-June Last purchase phase is most challenging
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Fabric
InventoryCut, Sew, Assembly
Blank GoodsInventory Screen
Printing
FG Inventory
RD centre
Hot Market
& Chase
Retailer
Outlet
Given the uncertaintyassociated with player demand,how should Reebok approach
inventory planning for NFL
Q 1
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CM RW
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This will entail the following changes- Increase the size of Indianapolis warehouse facility.
Since nature of clothes is not changed so go for bulk purchase availdiscount. Plant high efficiency screen printing facility machine. Strengthen Contract Manufacture relationship to lower down the
lead time problem.
Advantages of the new Supply Chain- Saves time to a large extent resulting in more consumer satisfaction
by fast delivery. Reduce shipping cost and air cost to great extent. Can reduce inventory of outdated or unsold jersey due to variability
of players and team color pattern by keeping more storage of
prepared white jersey. Reduce the chances of discount selling to great extent. More security to retailer in terms of placing order even in shorter
period.
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The goal: To provide customer with a quality product, in the righttime, and in the right quantity.
Reebok's goal should be to maximize profits. This is becausealthough Reebok may want to minimize inventory, it needs toconsider the impact such an action will have on the service level andits profitability.A low inventory may mean lower holding costs and lower risks ofhaving excessive dressed jerseys after the end of season, which maybecome obsolete due to players switching teams or changes in jersey
design. However, it could also mean a lower service level as it takes4-8 weeks for jerseys to arrive at their warehouse from the CM. Bythat time, the demand would have yet changed again as the NFLgames are played almost every week. Therefore, it would be betterfor Reebok to aim at maximizing profit, as that will take all the risk,service level and inventory into account.
Yes, the key is in the forecast. The more accurate, the greater chanceto achieve both of the goals.
What should Reeboks goal be?Should Reebok minimize inventory atthe end of the season? Or Maximizing
profits? Can Reebok achieve both?
Q 2
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High service level is higher for products with-High profit margin (+)
High volume (+)
Low variability (-)
Short LT (+/-)Therefore, it will be a challenge for Reebok to providehigh service levels.
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What service levelshould Reebok provide
to its customer?
Q 2
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Yes. Reebok company uses combination of forecast and knowndemand to place order . Forecast developed based on:
Past sales
Team and player performanceMarket intelligenceInformed guess
Forecast is revised as the sales cycle unfold
RiskPooling concept is used
Also, PostponementTheory is practiced
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Are the models inSection 2.2.2 helpful
here?
Q 3
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What is the cost of underage fora dressed Jersey? What is thecost of overage for a dressed
Jersey?
Q 3
Cost of dressed jersey= $10.9Salvage value of dressed jersey= $7
Underage = lost profit foregone by not stocking enough jerseysOverage = cost of stocking too many jerseys
Overage cost for dressed jersey = 10.9 - 7 = 3.7Underage cost for dressed jersey = 24 10.9 = 13.1
Therefore, Underage cost > Overage cost, quantitatively & qualitatively
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Dressed Jerseys are made based on the order and
minimum order quantity for each player. While blankJerseys are allocated for unexpected demand and hot-market item.
Reebok should place the purchase order only for blankjerseys from the CMs. The decoration of the blank jerseysshould be done centrally by Reebok.
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How might Reebokdecide between dressed
jersey and blank jersey?
Q 3
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Using the forecast for the New England Partiots,what is the optimal quantity to order for eachplayer? For blank Jerseys? What profit do you expectfrom Reebok? How much and what type of inventory
is expected to be leftover at the end of the season?
Q 4
Mean Lots to order (rounding to nearestdecimal ahead)
Q
Total 87680
# 12 30763 30763/1728=18 1728*18= 31104
# 24 10569 7 12096
# 80 8159 5 8640
# 04 7270 5 8640
# 54 5526 4 6912
# 32 2118 2 3456
Others 23275 23275
Assuming that EOQ for dressed jersey= 1728
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Question 4
Assuming that supply matches demand exactly and
all blank jerseys are sold after decoration
Demand Ordered Cost Sold toRetailers
Sold on discount TotalProfit
DressedJerseys
64405 70848 70848*10.9=772243.
2
64405*24=1545720
(70848-64405)*7=45101
(1545720+45101)772243.2=
818577.8
BlankJerseys
23275 23275 23275*(9.5+2.4)=276972.
5
23275*24=558600
Nil 558600276972.5 =281627.5
1100205.3
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Salvage value of dressed jersey=$7Decoration cost= $2.4
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Thank You
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