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Case Studies 1 Topic: Inventory MGT

The document discusses Zhou Bicycle Company which distributes bicycles and parts from China. It incurs costs to place orders and carry inventory. The company wants to make an inventory plan for 2016 to maintain 95% service level while minimizing losses from lost orders. Historical demand data and a 2016 forecast are provided to aid the planning.

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53 views3 pages

Case Studies 1 Topic: Inventory MGT

The document discusses Zhou Bicycle Company which distributes bicycles and parts from China. It incurs costs to place orders and carry inventory. The company wants to make an inventory plan for 2016 to maintain 95% service level while minimizing losses from lost orders. Historical demand data and a 2016 forecast are provided to aid the planning.

Uploaded by

Donald Duck
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CASE STUDIES 1

Topic : Inventory Mgt


Zhou Bicycle Company (ZBC), located in Seattle, is a wholesale distributor of bicycles
and bicycle parts. Formed in 1981 by University of Washington Professor Yong-Pin
Zhou, the firm’s primary retail outlets are located within a 400-mile radius of the
distribution center. These retail outlets receive the order from ZBC within 2 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 ZBC 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. ZBC receives all the models from a single
manufacturer in China, and shipment takes as long as 4 weeks from the time an order is
placed. With the cost of communication, paperwork, and customs clearance included,
ZBC estimates that each time an order is placed, it incurs a cost of $65. The purchase
price paid by ZBC, per bicycle, is roughly 60% of the suggested retail price for all the
styles available, and the inventory carrying cost is 1% per month (12% per year) of the
purchase price paid by ZBC. The retail price (paid by the customers) for the AirWing is
$170 per bicycle. ZBC is interested in making an inventory plan for 2016. 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 2 years are summarized in the following table. A
forecast for AirWing model sales in 2016 has been developed and will be used to make
an inventory plan for ZBC
Demands For Airwing Model
Discussion Questions
1. Suggest any three suggestions to reduce inventory cost

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