supply chain nfl

1. SCM Case
Reebok NFL Replica Jerseys:
A Case for Postponement
Amitkumar
Dibya Ranjan Otta
Samvedna kumari
Parkash Tiwari
Group 1

2. Outline
Reebok background
About NFL
Case
Demand for NFL replica jerseys
The sales cycle
Reebok supply chain
Purchase planning
Question & Answer

3. Reebok background
Headquarter in Canton, Massachussets
Started as small British shoe company
In 1979, Paul Fireman acquired North American license for
selling Reebok
In 1985, Reebok USA acquired Reebok British and Reebok
International went public
In 2000, Reebok signed 10 years contract with NFL

4. Background
• Tony Responsible for NFL Replica jersey.
• Employees strength – 7400.
• Known for sports apparel & foot wears.
• Total revenue of $ 3485 M & income operation $ 157 M –
2003.
• M. Paul Fireman CEO.
• Signed 10 year contract with NFL as sole licensee in Dec.
2000.
• NFL as premier professional league for American football 32
teams.
• Licensed Apparel Business- high margin- lucrative business.
• Demand is highly fluctuative due to many uncontrollable
factor.
• Retailers’ worry no option - Reebok mono provider for NFL

5. About NFL
National
Football
League (NFL)
American
Football
Conference
(AFC)
National
Football
Conference
(NFC)

6. About NFL
AFC
North
East
South
West NFC
North
East
South
West

7. Case
 Reebok developed its expertise in licensed Apparel
through acquisition and expansion.
 Purchased LogoAthletic located in Indianapolis having
extensive experience and expertise in sports apparel as
well past relationship with NFL.
 Reebok located Licensed Apparel management at
former LogoAthletic facilities in Indianapolis.
 4 Category of jersey- 5-ounce nylon diamond back mesh
body, nylon dazzle sleeves/yoke in team color & white,
8.6-ounce polyester flat knit rib collar, and stripe knit rib
collar, and stripe knit insert for selected teams.
 Sales – Demand Pattern : Highest in Aug. & Sept.
Off season from Feb. to
Apr.

8. Jersey
• Jersey with team colors and marking but without a player
name or number
• Purpose using blank jersey :
• Fill demand for the player that are order in small quantities
• To respond quickly to demand for popular player
• To meet immediate demand for player that suddenly change
teams
Blank
Jersey
• Jersey with the player name and number
• Contract Manufacturer and Reebok have an agreed
minimum order level of 1,728 units for the dressed
jersey for any players.
Dressed
Jersey

9. The sales cycle
Jan-Feb
• Retailers get discount to place pre-season orders for
delivery in May
Feb-Apr
• Limited ordering by retailers to re-balance stocks; some
short LT orders to respond to player movements
May-Aug
• Retailers order to position stock in their DC’s and stores in
anticipation of season, and expect 3 – 4 week delivery LT
Sep-Jan
• Retailers order to replenish stores, chase the demand, and
expect 1 – 2 week LT for Hot Market items

10. Raw
Material
Suppliers
Contract
Manufacturers
Reebok
Warehouse
Retail
Distribution
Centers
Retail
Outlets
Consumers
2 - 16
weeks
4 - 8
weeks
3-12 weeks 1 week
1-2 weeks or less 1 week
Normal Demand
“Hot Market” Demand

11. Fabric
Inventory
Cut, sew,
and
assembly
Blank
Inventory at
supplier
FG Inventory
Shipping
2 - 16
weeks
4
weeks
4
weeks
Screen Printing
Screen
Printing
Blank Goods
Inventory
1
weeks
Contract Manufacturers (CM) Reebok (Indianapolis)

12. Purchase planning
July-Oct
• Reebok places orders on contract manufacturers(CMs )for April
delivery; primarily orders blanks (~20% of annual buy)
Jan-Feb
• Reebok places orders for dressed jerseys based on retailers’
advance orders & remaining inventory (~ 15 – 20%) Reebok
orders dressed & blank jerseys, based on forecasts and inventory
targets
Mar-June
• Last purchase phase is most challenging

13. Improved Supply Chain
Fabric
Inventory
Cut, Sew, Assembly Blank Goods
Inventory
Screen
Printing
FG Inventory
2
Reebok Ware house
RD centre
Misc. Demand
Hot Market
& Chase
Retailer
Outlet
Up til RD at Indianapolis

14. Changes
 Increase the size of Indianapolis.
 Club together all the activities at one place.
 Plant high speed improved sewing machine.
 Widened the outsourcing option.
 Since nature of clothes is not changed so go for bulk
purchase avail discount.
 Keep high inventory of white unprinted jersey because
types of jersey is same.
 Plant high efficiency screen printing facility machine.
 Strengthen CM Relationship lower down lead time
problem follow JIT experiment in Apparel and footwear
business.

15. Advantages of New Supply Chain
 Saves time to a large extent more consumer satisfaction
by fast delivery.
 Reduce shipping cost and air cost to great extent.
 More Orders can be met as per the demand.
 Can reduce inventory of outdated or unsold jersey due to
variability of players and team color pattern by keeping
more storage of prepared white jersey.
 Reduce the chances of discount selling to great extent.
 More security to retailer in terms of placing order even in
shorter period.
 Use of MIS and better forecasting can be done on
several parameter mentioned in case.

16. Contd…
 Focus on Pull based supply chain for international
customers.
 More focus on push-pull strategy.
 Will follow the concept of cross-docking.
 By following the concept of e-business can fulfill
worldwide demand and will add value in terms of better
service value to customer end.

17. 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?

18. Case Discussion Questions
 1st question is best explained by improved model given
by our team.
 2nd Answer- the goal of is to minimize the finished
goods inventory and maintain the inventory of white
jersey in order to meet the further demands at the end of
season.
 Maximize the profit by improved supply chain model.
 Customer will be more satisfied with timely delivery of
their choice by offering pull based supply chain policy.

19.  3rd Answer- Retailer wholesale Price- $24/ J
Retailer sale at - $ 50/J
Cost of Decoration- $2.4/J
Discount Sale Reebok get return- $7/J
Cost of Holding unsold blank Jersey-
$1.045/J
( 11% 0f manufacturing cost )
 Salvage value for dressed (Sd) = $7
 Underage = cost of not stocking enough unit.
 Overage = cost of stocking to many units.
 Overage for blank = 9.5 – 8.46 = 1.04
 Underage for blank = 24 – (9.5 + 2.4) = 12.1
 Overage for dressed = 10.9 - 7 = 3.7
 Underage for dressed = 24 – 10.9 = 13.1

20.  Marginal profit obt. from selling blank jersey during this
season = 24-(9.5+2.4)= 24-11.9= 12.1
 Marginal cost of not sold additional blank jersey =24-11.9 +
1.04(11%of 9.5)
=24-12.94 = 11.06
Marginal profit for dressed=24-10.9 = 13.10
Marginal cost for dressed =10.9+1.19-7
=12.09-7=5.09
As in both case MP > MC and also running with good margin so,
Reebok can order more than the average demand.

21. Q4) Newsvendor-based Approach
 Solve newsvendor for entire team to get total
quantity of blanks and dressed jerseys to buy, and
more importantly:
 Get service measure for team = probability of not
stocking out (critical ratio)
 Solve newsvendor for each star player to determine
how many dressed jerseys to procure from CM,
where underage cost reflects option to use blanks
 Given the dressed jersey quantities, re-solve
newsvendor for entire team to find blank jerseys to
procure
Critical ratio – cost of underage/(cost of overage + cost of underage) = probability of not
stocking out.

22. Newsvendor Model with Risk Pooling
for NE Patriots
 Determine total quantity to buy, assuming
blank jerseys are the marginal units to buy
 For blank jerseys:
 Cost of overage = $9.50 – 8.46 = 1.04
 Cost of underage = $24.00 – 11.90 = 12.10
 Prob. of not stocking out of blanks(critical
ratio) =
12.1/(12.1+1.04) = 0.92

23. Newsvendor Model with Risk Pooling for
NE Patriots
Given the stock-out probability for the team:
 Consider each dressed jersey (i.e. for each star
player):
 Cost of overage = $10.90 – 7.00 = 3.90
 Cost of underage if blank available = $1.00
 Cost of underage if blank not available = $24.00 – 10.90
= 13.10
 Approx. cost of underage =
.92*$1.00 + (1 - .92)*$13.10=$1.96
 Critical ratio = 0.33
 Newsvendor purchases 51000 dressed jerseys

24. Newsvendor Model with Risk Pooling
for NE Patriots
 Given the quantities for dressed jerseys,
determine demand for blanks:
 the unmet demand for star players
 plus demand for the other players
 Solve newsvendor for blanks:
 Cost of overage = $9.50 – 8.46 = 1.04
 Cost of underage = $24.00 – 11.90 = 12.10
 Prob. of not stocking out of blanks = 0.92
 Newsvendor purchases 71000 blank jerseys
 Expected profit is $1.04 M

25. Purchase E[sold] E[unsold] E[short]
Dressed 87531 60244 27287 4161
Blanks 38027 22898 15129 377
Total 125558 83142 42416 4537
Purchase E[sold] E[unsold] E[short]
Dressed 51227 44265 6962
Blanks 70932 42712 28221
Total 122159 86976 35183 703
Results: Newsvendor with Risk Pooling
Results: Simple Newsvendor

26. 4. Optimal quantity of order of dressed jersey for 6 player
should be equal to forecasted demand.
and in case of another player ,as there is agreement
between Reebok & C.M for minimum order quantity i.e.
1728 per player for dressed jersey .
so we can’t recommend to give order for dressed jersey.
Reebok should give order for blank jersey equal to
forecasted demand i.e. 23,275 .
Profit for dressed jersey = 843705.5
Profit for blank jersey= 257421.5

27.  As replenishment of retail outlet is done through retail
distribution centre.
 With the help of Information& telecommunication system
it is possible to reduce the leading time to great extent as
there is big lead time .

28. • Considering all those factors we see that by clubbing all activity at
Indianapolis there will be significant fall made at CM end from 9.5 on
blank jersey and 10.9 on dressed jersey.
• If we keep blank or white (same) jersey with high inventory RBK has
to incur only cost of decoration which will be much cheaper option.
• RBK need to go for less discount selling again loss in cost will be
reduced, even if done for few jersey of any team it will be saving
option only.
• Ann. Cost of holding is also only 11% of capital cost for inventory &
costs for storage and handling so if we store more white jersey this
will be less then all other costs saved for transportation from CM end
and discount selling. (note- cost of any unsold blank jersey until next
season- $1.045/J)
• What RBK need to incur with centralized production is Cost of
decorating, Inventory cost, Cost of transportation to retail, Screen
printing.

29.  There still chances of further reducing the cost if we
follow measures of efficient forecasting by MIS,
improved marketing research methodologies on the
factors such as Past sales, team and player
performances, marketing intelligence, advanced
ordering, no. of jersey in warehouse etc.

30. Thank you