Sport Obermeyer (A) - Take Away
1. Production Planning for Short-Life-Cycle Fashion Products
1. Deep Background
Unprecedented number and variety of products are competing in markets ranging from wearing apparel, toys, power tools, and computers
Due to global competition, faster product development and increasingly flexible manufacturing systems.
Side Effects of Frequent New Product Introduction
Reduces average lifetime of products.
More products are at the beginning of their life (demand prediction is tough because there is no demand history) or at the end of their life (keeping inventory is expensive because products will soon be obsolete).
As products proliferate, demand is divided over a growing number of stock-keeping units (SKUs).
Even if forecast aggregate demand figures with certainty, becoming increasingly difficult to predict how that demand will be spread among the many SKUs they sell.
Predict the final score of a Tigers - Red Sox baseball game (aggregate) versus scoring by each inning (SKU level).
Makes it more and more difficult for manufacturers and retailers to predict which of their goods will sell and to plan production and orders accordingly.
Inaccurate forecasts are increasing (as well as costs of forecasting errors) resulting in too much or too little inventory:
1) Too much of unwanted goods - marked down (sold at a loss).
2) Loss of potential sales of items no longer in stock.
In industries with highly volatile demand (fashion apparel), the costs of such ‘stockouts’ and markdowns can actually exceed the total cost of manufacturing.
To handle inaccurate forecasts, turn to production-scheduling system like quick-response program, just-in-time (JIT) inventory system, manufacturing resource planning (MRP II).