CASE Reebok NFL Replica Jerseys A Case for Postponement

1. CASE: Reebok NFL Replica Jerseys:
A Case for Postponement
Prepared by: Shaheen Sardar
SCM Lab. Department of Industrial and
Management Engineering, Hanyang
University, South Korea

2. Reebok Introduction
• Type: Subsidiary
• Parent: Adidas
• Industry: Sports equipment
• Products: Sportswear, Footwear
• Founded: 1895 (as J.W. Foster and Sons)
• Founder: Joseph Williams Foster

3. Reebok Vision Statement
“Continue to bring
inspiration to
present and future athletes,
while
maintaining the
company's standard of quality
for
its products.”

4. Reebok Mission Statement
“At Reebok, we see the world
a little differently
and
throughout our history have made our mark
when we’ve had the courage
to challenge convention.
Reebok creates products and marketing
programs that reflect the brand’s unlimited
creative potential.”

5. Reebok Product Line
1) Shoes (athletic)
2) Apparels (clothing)
3) Sports equipment (accessories)
4) Exercising/ health products
5) Personal grooming

6. Reebok Logistics Facts
• 40 Main Footwear Factories in 8 Countries
• 600 Apparel Factories in 29 Countries
• 450 Raw Material Suppliers
• 27 Freight Forwarders
Transportation modes include Ship, Truck, Rail and Air
• 34 Custom Brokers
• Over 5,000 purchase orders placed each month

8. NFL: National Football League

10. How should Reebok plan and
manage inventory to manage
costs while providing flexibility
required to meet demand for
NFL Replica jerseys?

11. Licensed Apparel Business
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

12. Channel Strategy and
Practices:
•Many uncontrollable Factors:
•Players and Teams generate demand based on
performance
•Players get hurt, Players trade teams, Teams do poorly
•Team changes colors, design
•Forecast Demand?
•Postponement Production?
 “HOT” Items
• 1-2 weeks lead time
• New Player Jerseys, Championship T-Shirts, New Color Jerseys,
New Designs
 “STABLE” Items
• 3-12 weeks lead time

13. Postponement Strategy
A business strategy
that
maximizes possible benefit
and
minimizes risk
by
delaying further investment
into a product or service
until the last possible moment

14. Two-stage production with postponement
1. Take advantage of lower labor costs by outsourcing the
production of blank jerseys to Central America.
2. Optimize service levels by souring the final assembly in
the US. This also creates local jobs in the areas of textile
and silk-screen printing.

15.  Reebok carefully structured its supply chain to handle different
types of items based on customer demand patterns, items such as
hats, jerseys, shirts etc.
 Offshore Manufacturing of blank Jerseys in Central America
 Low costs, Treaties, Human rights regulation, Distance.
 Reebok Finishing Facility for screen printing and embroidering
in US.
 The cost of lost sales is greater than the cost to ship, unpack,

16. Supply > Demand 
•Problem Now:
 Should Reebok:
• Sell to discounters?
• Keep blank jerseys for Next
year?

17. Supply Chain Challenges
Purchase Order Management
• Lack of complete purchase order visibility to trading
partners to manage lead time & inventory.
• Difficult to extend internal systems to link different
supply chain parties.
• Difficult to accurately implement customer specific
services (e.g. ASN, pre-ticketing, labeling, mark-for-store).

18. Supply Chain Challenges
Transportation Logistics Management
• Different carriers, different ways to trace & track.
• Non-completeness of consignment check point.
• Manual processes for smaller carriers, air and
exceptions.
• Last minute inventory management difficult.

19. Communication Methods: Fax, Mail, Couriers, site visits,
EDI, proprietary file transfers
the Old Way
Country
Liaison
Offices
Label
Providers Banks
Factories
Raw
Material &
&
Component
Suppliers
Transportation
Providers
Customs
Reebok
HQ
Drop
ship
customers
Reebok
Trading
Hong
Kong

20. the New Way
Business-to-Business data sharing /Vendor Neutral E-Hub/ Hosted
Environment (ASP model)
Communication Methods: Workflow, message alerts, back
office integration with reporting capabilities
Reebok HQ
Country/
Liaison
Offices
Raw
material &
Component
supplies
Factories
Banks
Employees
Drop
ship
customers
Customs
Transportation
Providers
Label
Providers
Custom-built
e-HUB with LINE,
a division of container
port operator, Hutchison
Whampoa
in Hong Kong
Reebok
Trading
Hong
Kong

25. Purchasing and Sales Timeline

31. Simple Newsvendor Model
Notation

32. Simple Newsvendor Model
Given Information

33. Given Forecasts
Simple Newsvendor Model

34. The Objective
• Expected revenue:
$24*E[Dressed_Sold] + 24*E[Blanks_Sold] + $7*E[Dressed_Unsold]
+ $8.46* E[Blanks_Unsold]
• Expected Cost:
$9.50*Blanks + $10.90*Dressed + $2.40*E[Blanks_Sold]

35. Simple Newsvendor Model
• Step 1: Calculate the Overage and Underage
costs.

36. Simple Newsvendor Model
• Step 2: Calculate the Critical ratios (target
stocking level).

37. Simple Newsvendor Model
• Step 3: Calculate the Optimal quantities.
• Assume the provided forecasts are normally distributed.

38. Results (Optimal quantities)

39. Expected unsold and expected unmet
demand

40. Sales Results
Expected units sold for all of New England would be
85179 units, based on a stocking plan of 118485 units.
The net profit would be $986000.5

41. Possibility to deal with unmet demand
• We assumed that blank jerseys would never be used to
meet unmet demand from selected players.
• In reality, if blank jerseys were available (as indicated
by the quantity shown as E(Sold), then extra blanks
would be used to meet the unmet demand.
Best Case situation
• Jerseys were available to satisfy all unmet
demands for all player jerseys.

42. Best Case situation
Expected units sold increases by the 1875
units met with blanks to 87,055 and total
expected profits increase to $1048819.524.

50. References
• Simchi-Levi, E., & Kaminsky, P. (2008). Designing and managing the supply chain:
Concepts, strategies, and cases (3rd edition). United-States: McGraw-Hill.
• Rietze, S. M. (2006). Case studies of postponement in the supply chain (Masters
dissertation, Massachusetts Institute of Technology).
http://dspace.mit.edu/handle/1721.1/34601#files-area
• Parsons, J. C. W. (2004). Using a newsvendor model for demand planning of NFL
replica jerseys (Masters dissertation, Massachusetts Institute of Technology).
http://dspace.mit.edu/handle/1721.1/28506
• Graves, S. C., & Parsons, J. C. (2005). Using a newsvendor model for inventory
planning of NFL replica jerseys. In Proc. MSOM Conference.
• http://dspace.mit.edu/bitstream/handle/1721.1/71720/15-762j-spring-
2005/contents/lecture-notes/reebok_draftscg.pdf
• http://www.reebok.com
• http://en.wikipedia.org/wiki/Reebok