Reebok NFL Replica Jerseys: A Case for Postponement
21 May 2019
B.Sc. – Supply Chain Management (elective)
Reebok NFL Replica Jerseys: A Case for Postponement
e Kai Foerstl Professor of Supply Chain Management & Logistics
German Graduate School of Management and Law (GGS)
Kai Foerstl | 2
Planning Question
Reebok NFL Replica Jerseys: A Case for Postponement
How should Reebok plan and manage inventory to manage costs while providing the flexibility required to meet demand for NFL Replica jerseys?
Source: Stephen C. Graves 2005
Kai Foerstl | 3
Guiding Questions for the Reebok Case Analysis
Reebok NFL Replica Jerseys: A Case for Postponement
Consider the case “Reebok NFL Replica Jerseys: A Case for Postponement”. Please address the following questions and use Excel for calculations:
Please submit the excel-file and
Submit a three page word-document in which you provide notes on your approach and give clear answers
to each (sub-)question.
Preparation Questions:
1. Given the uncertainty associated with player demand, how should Reebok approach
inventory planning for NFL replica jerseys? Consider the newsvendor model. What is the
cost of underage for a dressed jersey? What is the cost of overage for a dressed jersey?
How might Reebok decide between dressed jerseys and blank jerseys?
2. Using the forecast for the New England Patriots, analyze the cases where (a) dressed
jerseys are used for the star players and blank jerseys for the other players and (b) blank
jerseys are used for all players. For each case: What is the optimal quantity of dressed
jerseys to order for each player? For blank jerseys? What profit do you expect for Reebok?
How much and what type of inventory is expected to be left over at the end of the season?
3. Could Reebok use a “partial postponement” strategy, satisfying demand for each star player
with dressed and with blank shirts? What would be the advantages of such a strategy? How
should Reebok determine the order quantities under such a strategy? (Calculations for such
a strategy are a little tricky, therefore sketch your reasoning in your report)
Kai Foerstl | 4
Outline of Case Discussion
Reebok NFL Replica Jerseys: A Case for Postponement
Discuss business context, nature of demand, the
sales cycle, key success factors, failure modes
Discuss supply chain, planning cycle, planning
challenges
Frame as single-season planning problem; relate to
newsvendor model
Develop approach and key insights with NE Patriots
example
Report on findings for NFL
Kai Foerstl | 5
Licensed Apparel Business
Reebok NFL Replica Jerseys: A Case for Postponement
Situation Impact
Reebok received an NFL
exclusive license in 2000
Highly seasonal & very uncertain
demand for player jerseys
Teams are more predictable, but
correlated with success
Hot-market players and teams
emerge during season
High margins, fashion item
Demand driven by availability
Unsold jerseys can become
instantly obsolete – trades; design
changes
No direct competition for
product – 100% market share
Demand is concentrated over
five month period
If product is not quickly
available to meet demand the
opportunity is lost
Lost sales cost more than
inventory overstocks, but
come with a high risk of
obsolescence
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Nature of Consumer Demand
Reebok NFL Replica Jerseys: A Case for Postponement
Sales are highest at start of season, August – Sept.
“Hot market” players and teams emerge over course of season
Increase at end of season for contending teams & stars: Christmas,
playoffs and Super Bowl
Off season is slower, with demand spikes for big-name player movements
Kai Foerstl | 7
Annual Sales Cycle
Reebok NFL Replica Jerseys: A Case for Postponement
Retailers order to replenish stores, chase the
demand, and expect 1 – 2 week LT for Hot
Market items
Jan - Feb
May - Aug
March -
April
Sept -
Dec
Retailers get discount to place pre-season
orders for delivery in May
Limited ordering by retailers to re-balance
stocks; some short lead time (LT) orders to
respond to player movements
Retailers order to position stock in their DC’s
and stores in anticipation of season, and
expect 3-4 week delivery LT
Kai Foerstl | 8
Outline of Case Discussion
Reebok NFL Replica Jerseys: A Case for Postponement
Discuss business context, nature of demand, the
sales cycle, key success factors, failure modes
Discuss supply chain, planning cycle, planning
challenges
Frame as single-season planning problem; relate to
newsvendor model
Develop approach and key insights with NE Patriots
example
Report on findings for NFL
Kai Foerstl | 9
Supply Chain Overview
Reebok NFL Replica Jerseys: A Case for Postponement
Kai Foerstl | 10
Internal Supply Chain
Reebok NFL Replica Jerseys: A Case for Postponement
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Annual Purchasing Cycle
Reebok NFL Replica Jerseys: A Case for Postponement
Reebok places orders on Contract Manufacturers
(CMs) for April delivery; primarily orders blanks
(~20% of annual buy)
Reebok orders dressed & blank jerseys, based
on forecasts and inventory targets
Last purchase phase is most challenging
Reebok places orders for dressed jerseys based
on retailers’ advance orders & remaining
inventory (~ 15 – 20%)
July-Oct
Jan-Feb
Mar-June
Kai Foerstl | 12
Outline of Case Discussion
Reebok NFL Replica Jerseys: A Case for Postponement
Discuss business context, nature of demand, the
sales cycle, key success factors, failure modes
Discuss supply chain, planning cycle, planning
challenges
Frame as single-season planning problem; relate to
newsvendor model
Develop approach and key insights with NE Patriots
example
Report on findings for NFL
Kai Foerstl | 13
Single Season Planning Problem
Reebok NFL Replica Jerseys: A Case for Postponement
What volume and mix of jerseys to purchase during March to June?
Planning framework:
Given forecasts (and advanced orders) for team and players
Decide inventory targets for dressed and blank jerseys for season
Place orders guided by these targets
Revise forecasts (say) each month based on current information; update targets accordingly
How should we set inventory targets at the start of the
season?
Kai Foerstl | 14
Outline of Case Discussion
Reebok NFL Replica Jerseys: A Case for Postponement
Discuss business context, nature of demand, the
sales cycle, key success factors, failure modes
Discuss supply chain, planning cycle, planning
challenges
Frame as single-season planning problem; relate to
newsvendor model
Develop approach and key insights with NE Patriots
example
Report on findings for NFL
Kai Foerstl | 15
2003 Forecast – As of March 1, 2003
Reebok NFL Replica Jerseys: A Case for Postponement
What should inventory target be for dressed
jerseys for each player and for blank jerseys?
Side condition:
CMs have minimum order quantities of 1728 -> Qdi = 0 oder
Qdi = 1,728
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Representative numbers for Replica Jerseys
Reebok NFL Replica Jerseys: A Case for Postponement
Recommended retail price ---- more than $50 Wholesale price = $24.00 Purchase costs undressed = $9.50 costs of dressing at contract manufacturer = + $1.40 -> $10.90 costs for dressing at Reebok = + $2.40 -> $11.90 Clearance price for dressed shirts = $7 Ficticious clearance price (holding costs) for blank shirts = $1.045 CR stock-out (blanks) =
Co/(Cu+Co)=1.045/(12.10+1.045)=0.08
Order Qblanks (Qb) so that the probability of stocking out blanks is equal to 8%
Alternatively, this means that the expected service level for blanks will be 92%
Kai Foerstl | 17
Representative numbers for Replica Jerseys
Reebok NFL Replica Jerseys: A Case for Postponement
Overage dressed: Cod = 10.90 – 7.00 = $3.90 Underage dressed (no blanks): Cudnb = 24.00 – 10.90 = $13.10 Underage dressed (blanks available): Cudba = 11.90 – 10.90 = $1.00
Cud = E(ba)x$1.00 + E(nb)x$13.10 Cud = (0.92)x$1.00 + (0.08)x$13.10 = $1.96
CR (dressed) = Cod/(Cu+Cod) = 3.90/(1.96+3.90) = 0.67
Order Qd (for each Star Player), so that the probability of stocking out dressed shirts is equal to 67%;
in other words the service level for dressed shirts is 33%.
Kai Foerstl | 18
Outline of Case Discussion
Reebok NFL Replica Jerseys: A Case for Postponement
Discuss business context, nature of demand, the
sales cycle, key success factors, failure modes
Discuss supply chain, planning cycle, planning
challenges
Frame as single-season planning problem; relate to
newsvendor model
Develop approach and key insights with NE Patriots
example
Report on findings for NFL