SCM Case

Reebok NFL Replica Jerseys:

A Case for Postponement
Members: Cherry
Sam
Robbin
Sarah
 Outline
Reebok background

About NFL

Retailer states

Demand for NFL replica jerseys

The sales cycle

Reebok supply chain

Purchase planning

Question & Answer

 Reebok background
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Reebok NFL
About NFL

National Football League (NFL)

American Football Conference National Football Conference

(AFC) (NFC)
 About NFL

AF NF
C C

Wes We
t st

Sout Nort Sou Nor

h h th th

East Eas
t
 AFC - North and South teams

Baltimore Ravens Houston Texans

Cincinnati Bengals Indianapolis Colts

Jacksonville
Cleveland Browns
Jaguars

Pittsburgh Steelers Tennessee Titans

 AFC - West and East teams

Denver Broncos Buffalo Bills

Kansas City Chiefs Miami Dolphins
New England
Oakland Raiders Patriots
San Diego
Chargers New York Jets
 NFC - North and South teams

Chicago Bears Atlanta Falcons

Detroit Lions Carolina Panthers

New Orleans
Green Bay Packers
Saints
Tampa Bay
Minnesota Vikings
Buccaneers
 NFC - West and East teams

Dallas Cowboys Arizona Cardinals

San Francisco
New York Giants 49ers
Philadelphia
Seattle Seahawks
Eagles
Washington
Redskins
St. Louis Rams
2003 Super bowl
 Problem
 I have a warehouse full of jerseys out there and
retailers are screaming for the teams and players
I don’t have!
 Every year it seems like we have the right mix of
inventory going into the season, and then some te
am that no one expected to do well gets off to a
4-0 start and the team everyone expected to conte
nd for the Super Bowl Is losing games.
 Suddenly I have 1000s of jerseys I can’t sell an
d 1000s of order I can’t fill
 Retailer states
 The Reebok line is great. We’re excited and anxio
us at the same time. [In the past] the fear was th
at one team jersey could be found from five differ
ent manufacturers at five different stores in the
mall. Now the [question] is, will the consumer hav
e to pay an extra $20 for a team jersey because it
is from Reebok?
 As a top-tier retailer in apparel, we’ll only have
access to that one brand.
 I think that Reebok makes great product. We just h
ope they can deliver because we won’t have options
B, C, or D to go to.
 Demand for NFL replica jersey
s
 Customerdemand fluctuate
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.

 Hotmarket demand
Hot market item (demand), is an item that was either not exp
ected 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 and
the team everyone expected to contend is losing games
2. Regular player become super star.
Jersey

●
● Jersey
Jersey with
with team
team colors
colors and
and marking
marking but
but without
without aa player
player name
name or
or
Blank ●
●
number
number
Purpose
Purpose using
using blank
blank jersey
jersey ::
Fill
Fill demand
demand for
for the
the player
player that
that are
are order
order in
in small
small quantities
Jersey quantities
●
●

●
● To respond quickly to demand for popular
To respond quickly to demand for popular player player
●
● To
To meet
meet immediate
immediate demand
demand for for player
player that
that suddenly
suddenly change
change teams
teams

●
Jersey with the player name and number
Dressed
●

●
● Contract Manufacturer and Reebok have an
agreed minimum order level of 1,728 units for
Jersey the dressed jersey for any players.
The sales cycle
Retailers get discount to place pre-season orders for
Jan-Feb
●
●

delivery in May

Limited ordering by retailers to re-balance stocks; some

Feb-Apr
●
●

short LT orders to respond to player movements

Retailers order to position stock in their DC’s and stores in

May-Aug
●
●

anticipation of season, and expect 3 – 4 week delivery LT

Retailers order to replenish stores, chase the demand, and

Sep-Jan
●
●

expect 1 – 2 week LT for Hot Market items

Reebok supply chain

Consumers

Raw Contract Reebok Retail

M aterial M anufacturers Warehouse Distribution Retail
Suppliers Centers Outlets

Normal Demand
2 - 16 4-8 3-12 we eks 1 we e k
we e ks we e ks
“Hot M arket” Demand
1-2 we eks or less 1 we e k
Reebok supply chain
Contract Manufacturers (CM) Reebok (Indianapolis)

Cut, sew, Blank

Fabric Inventory at
Inventory and Blank Goods S creen
assembly supplier S hipping Inventory Printing

S creen Printing
FG Inventory

2 - 16 4 4 1
weeks weeks weeks weeks
Purchase planning

July-Oct Reebok places orders on CMs for April delivery;

●
●

primarily orders blanks (~20% of annual buy)

Jan-Feb
Reebok
Reebok places
●
●
places orders
orders for
for dressed
dressed jerseys
jerseys based
based on
on retailers’
retailers’ advance
advance
orders
orders & remaining inventory (~ 15 – 20%) Reebok orders dressed &
& remaining inventory (~ 15 – 20%) Reebok orders dressed &
blank jerseys, based on forecasts and inventory targets
blank jerseys, based on forecasts and inventory targets

Mar-June Last purchase phase is most

●
●

challenging
Question
Given the uncertainty associated with player demand, how should Reebok
approach inventory planning for NFL

What should Reebok’s goal be? Should Reebok minimize

inventory at the end of the season? Or Maximizing profits? Can
Reebok achieve both? What service level should Reebok provide
to its customer?
Are the models in Section 2.2.2 helpful here? 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 Jersey
and blank Jersey?
Using the forecast for the New England Partiots, what is the
optimal quantity to order for each player? For blank Jerseys? What
profit do you expect from Reebok? How much and what type of
inventory is expected to be leftover at the end of the season?
 Question 1
Given
Given thethe uncertainty
uncertainty associated
associated with player
with player demand, demand, how
how should should
Reebok
Reebok approachapproach inventory
inventory planning planning for NFL
for NFL

 Generate team and player level forecast Offer

±20% discount for early order in January-Febr
uary
 Prepare 1,728 dressed Jerseys for any player
 Prepare blank Jerseys (shared with other appa
rel items)
 Provide printing facility in the Reebok’s DC
(capacity 10,000 Jerseys per day)
 Outsource the deficit of production local man
ufacturing
 Question 2
What should Reebok’s goal be? Should Reebok minimize inventory at the end of
the season? Or Maximizing profits? Can Reebok achieve both? What service level
should Reebok provide to its customer?

 The goal: To provide customer with a quality prod

uct, in the right time, and in the right quantit
y.
 Reebok should minimize its inventory to maximize
its profit by reducing holding cost and the risk
of leftover in each season
 Yes, the key is in the forecast. The more accurat
e, the greater chance to achieve both of the goal
s.
 High service level: providing all customer order,
including the revised order
 Question 3
Are the models in Section 2.2.2 helpful here? What is the cost of underage
for a dressed Jersey? What is the cost of overage for a dressed Jersey?

 Yes. Reebok company uses combination of forecast and kno

wn demand to place order for their supplier. Forecast de
veloped based on: past sales, team and player performanc
e, market intelligence, advance order, informed guess. F
orecast is revised as the sales cycle unfold.
 Cost of blank jersey = $9.5
Cost of Dressed jersey = $10.9
Cost of decorating a blank jersey in Indianapolis =
$2.4
Salvage value = $7
 Cost of underage for dressed jerseys:
1.Finished in contract manufacturers: $10.9
2.Finished in Indianapolis: $9.5+$2.4=$11.9
 Cost of overage for dressed jerseys:
$10.9 - $7 = $3.9
 Question 3
How might Reebok decide between dressed Jersey and blank Jersey?

 Order on July-October: blank Jersey (stored in C

M) , January-June: dressed Jerseys (known demand)
,combination of dressed Jerseys (order) and bla
nk Jersey (forecast).
 Dressed Jerseys are made based on the order and m
inimum order quantity for each player. While blan
k Jerseys are alocated for unexpected demand and
hot-market item.
Question 4
Using the forecast for the New England Partiots, what is the optimal quantity to order for each
player? For blank Jerseys? What profit do you expect from Reebok? How much and what type of
inventory is expected to be leftover at the end of the season?

The first step is to calculate the overage and underage costs for both Blank and Dressed
Given information
Wholesale sale price (P) = $24 Cost of blank (Cb) = $9.5
Cost of dressed (Cd) = $10.9 Cost to decorate in North American (Cnad) = $2.4
Salvage value for blank (Sb) = $8.46 Salvage value for dressed (Sd) = $7
Cost of capacity (Cc) =$0

The next step is to calculate the critical ratio

Overage for blank = Cb - Sb = 9.5-8.46 =1.04

Underage for blank = P - Cb – Cnad –Cc =24-9.5-2.4 = 12.1
Overage for dressed = Cd – Sd = 10.9-7 = 3.9
Underage for blank = P-Cd = 24-10.9 = 13.1
Critical ratio (Blank) = underage / (underage + overage) =12.1/(12.1+1.04)=0.92
Critical ratio (Dressed) = underage / (underage + overage) =12.7/(12.7+3.48)=0.77

To calculate the optimal quantities , assume the provided forecasts are normally distributed
Question 4
Using the forecast for the New England Partiots, what is the optimal quantity to order for each
player? For blank Jerseys? What profit do you expect from Reebok? How much and what type of
inventory is expected to be leftover at the end of the season?

Following this purchase plan , Reebok can expected the following sales results:

Player Q E[Sold] E[unsold] E[unmet] E[profit]

NEW ENG
PATRIOT
Tom #12 41018 28918 12100 1845 331640.24

TY#24 14092 9935 4157 634 113938.27

TROY#80 10879 7670 3209 487 87955.3

ADAM#04 10501 6688 3812 581 72748.54

TEDY#54 7983 5084 2898 442 55302.94

ANTOWAIN# 3059 1948 1111 169 21192.31

32
Other players 38027 22898 15129 377 224946.72

Total 125558 83142 42416 4537 907724.33