wholesale distributor of bicycles and bicycle parts

Martin-Pullin
Bicycle Corporation

Martin-Pullin Bicycle Corp. (MPBC), located in Dallas,
is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by cousins Ray Martin and Jim Pullin,
the firm’s primary retail outlets are located within a 400-mile radius of the distribution
center. These retail outlets receive the
order from Martin-Pullin within two days after notifying the distribution center,
provided that the stock is available. However,
if an order is not fulfilled by the company, no backorder is placed; the retailers
arrange to get their shipment from other distributors, and MPBC loses that amount
of business.
The company distributes a wide variety of bicycles. The most popular model, and the major source of
revenue to the company, is the AirWing. MPBC
receives all the models from a single manufacturer overseas, and shipment takes
as long as four weeks from the time an order is placed. With the cost of communication, paperwork, and
customs clearance included, MPBC estimates that each time an order is placed, it
incurs a cost of $85. The purchase price
paid by MPBC, per bicycle, is roughly 65% of the suggested retail price for all
the styles available, and the inventory carrying cost is 2% per month (24% per year)
of the purchase price paid by MPBC. The retail
price (paid by the customers) for the AirWing is $250 per bicycle.
MPBC is interested in making an inventory plan for 2014. The firm wants to maintain a 95% service level
with its customers to minimize the losses on the lost orders. The data collected for the past two years are
summarized in the table below. A forecast
for AirWing model sales in the upcoming year, 2014 has been developed and will be
used to make an inventory plan for MPBC.

Discussion
Questions

1.
Develop an inventory
plan to help MPBC.
2.
Discuss ROPs and total
costs.
3.
How do you handle
the fact that the Reorder Point is larger than the EOQ?
4.
How can you address
demand that is not at the level of the planning horizon?

Demand
for AirWing Model
Month
2012 2013 Forecast for2014
January
6
7
9
February
12 14 16
March
24 27 31
April
46 53 59
May
75 86 96
June
47 54 61
July
30 34 39
August
18 21 24
September
13 15 17
October
12 13 15
November 22 25
29
December
38 42 46
Total 343 391 443

 

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