This case is about Reebok International Ltd., well known for its sports and footwear apparel that signed a 10-year contract with NFL in 2000. Uncertain demand made management to start thinking about improvement of supply chain model. Company needs to adapt all business processes such as distribution, manufacturing and sales to deliver hot-market items in the short-lead time in demanded quantity.
Relevant background and facts.
Reebok is headquartered in Canton, MA. It started as a small British shoe company. In 1979 M.Paul Fireman, the Chairman and CEO, acquired North American license for selling Reebok. In 1985, Reebok went public. In 2003 Reebok had $3,485 million revenues and $ 157 million operating income with approximately 7400 employees. Reebok has reputation of delivering quality products and became mono provider for NFL jerseys after they signed a contract. This fact made retailers to worry about having no other suppliers to distribute the jerseys. The main importance for Reebok is ability to deliver hot-market items, as demand of the specific items in every season is different. Reebok developed its expertise in licensed Apparel through acquisition and expansion. Purchased in 2001 LogoAthletic small business in Indianapolis became the place of its Licensed Apparel management with former facilities. LogoAthtletic had extensive experience and relationships with NFL that helped Reebok to operate more efficiently.
The annual sales starts in January/February, but the hottest time is in August/September. By the end of August, Reebok shipped 50% of sales to retailers. The lead-time for replenishment is 3-4 weeks. Retailers get discounts for pre-orders. Between February and April is limited ordering and Reebok has to make adjustments. Time between September and January is the “Chase” time for company as retailers order to replenish stores, chase the demand and expect 1-2 week lead-time for hot-market items. Thus, in purchase planning the last chase period is the most challenging. From July to October Reebok placed orders for CM 20% of annual buy for the orders for April, from January to February they do orders based on advanced forecasting and remaining inventory (about 15-20%).
Reebok has own screen printing facility in Indianapolis and able to print 10000 jerseys in peak season. Moreover, they use outsourcing if demand exceeds the capacity. Outsourcing costs are 10% higher than the internal printing. Minimum order is 1728 units of jerseys for one player (agreement between CM and Reebok). Jerseys with less demand players are printed in Indianapolis. Patriots team demand forecasting mean is 87,680 items and standard deviation is 19,211. Reebok aggregated forecast for more than 23, 000 jerseys for all other…