Reebok NFL Replica Jerseys: A Case for Postponement

Reebok International Ltd. (Reebok) is an American sportswear and apparel company. With its headquarters in Canton, Massachusetts, the company designs, manufactures, and markets a broad range of sports apparel and footwear brands worldwide. Under the leadership of Paul Fireman, the company has grown over the years to become one of the largest players in the global sportswear and apparel industry. In 2000, Reebok entered into a 10-year agreement with the National Football League (NFL) to manufacture and market NFL licensed merchandise, including an NFL-branded apparel line, footwear, practice apparel, sideline apparel, and on-field uniforms. With 32 teams, NFL is the leading professional confederation for American football.

Licensed Apparel Business

Whereas the licensed apparel market is a lucrative market, retailers face a number of concerns since demand is influenced by factors beyond their control. Retailers rely on Reebok to deliver merchandise on time and without increasing prices. Without timely delivery and affordable costs, retailers would not have other options to consider. Retailers are also concerned about Reebok's capacity to deliver hot-market items. These items are crucial for stimulating demand. Though hot markets delivery is always an issue, Reebok has performed quite satisfactorily on this aspect.

Demand for NFL Replica Jerseys

Demand for NFL replica jerseys is influenced by the passion and enthusiasm fans have for the game. The demand is highest at the start of the season (August-September) and during off-season player moves (February-April). Demand is also driven by teams' performance in the previous season as well as in the beginning of the season. For instance, demand will be lower for a team that performed poorly in the previous season and/or in the beginning of the season. Further, consumers purchase jerseys during the Christmas seasons as gifts for their loved ones.

Sales Cycle

The sales cycle generally starts in May, when pre-season orders are delivered to retailers. As shown in Figure 5, this is three months to the beginning of the season. Orders placed between May and August are mainly meant to replenish demand by retailers, especially for low stock and high demand items. Further replenishment is done between September and January. This is the time when consumers are sensitive to team and player performance as well as hot-market items -- it is the chase period. Retailers reduce orders between February and April as it is the off-season period. Orders made during this season are mainly driven by player movements.

Supply Chain

Effective inventory management is important to ensure demand is met satisfactorily. Figures 2 and 3 depict Reebok's supply chain.... For normal demand, retailers expect lead times of 3-12 weeks, and 1-2 weeks for hot-market demand. Once orders are placed, contract manufacturers ship the finished goods to Reebok's warehouse in Indianapolis. From this point, the finished goods are distributed to retail distribution centres and finally to retail outlets. As seen in Figure 3, some jerseys are shipped to the distributor centre without prints to take care of unexpected changes in demand as well as off-season demand.

Purchase Planning

As illustrated in Figure 5, purchase planning commences much prior to the sales cycle. The purchase cycle begins 14 months before the start of the target season. Reebok places purchase orders with its contract manufacturers two times a month in July, August, September, and October. Ordinarily, all orders placed during this period are for blank jerseys, with delivery scheduled in April. This is because of uncertainty about the schedule of the upcoming season. Contract manufacturers manufacture the blank jerseys and hold them in inventory to deliver them on demand by Reebok. From January, Reebok places purchase orders based on certain demand. These orders are usually for dressed jerseys and are aimed at fulfilling advance orders by retailers. In May and June, Reebok places purchase orders majorly to ensure there is enough stock to accommodate the upcoming season.

Planning Problem

Reebok faces considerable capacity planning challenges at its screen printing facility in Indianapolis. The facility has a capacity of printing 10,000 jerseys daily. However, owing to changeover times, timing issues, and multiple machine requirements, the facility's actual capacity is reduced. This means that printing the 10,000 jerseys usually takes two days. Jersey printing occurs throughout the year, with capacity utilisation for NFL jerseys varying across months (30% in February-March, 80% in April-July, and 65-75% in August-January). On average, the annual capacity for blank jerseys is 30,000 jerseys per week or 1.5 million jerseys annually. In the event immediate requirements surpass this capacity, Reebok has to outsource at a cost approximately 10% higher than the normal cost.

Discussion Questions

Question 1

Uncertainty in player demand presents inventory planning challenges for Reebok. To overcome this challenge, it is important for the company to forecast demand on the basis of factors such as previous sales, team and player performances, advance orders, informed guesses, and market intelligence. The forecasts should be continuously revised throughout the sales cycle.

Question 2

For Reebok, balancing between inventory minimisation at the end of the season and…