Case Study
Case Study
Martin-Pullin Bicycle Corporation
Martin-Pullin Bicycle Corporation (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 $65. The purchase price paid by MPBC, 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 MPBC. The retail
price (paid by the customers) for the AirWing is $170 per
bicycle.
MPBC is interested in making the inventory plan for
2012. 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 following
table:
A forecast for AirWing model sales in the upcoming year
2012 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 can you address demand that is not at the level of the
planning horizon?
| MOnth |
2010 |
2011 |
FOreCaSt FOr 2012 |
| January | 6 | 7 | 8 |
| February | 12 | 14 | 15 |
| March | 24 | 27 | 31 |
| April | 46 | 53 | 59 |
| May | 75 | 86 | 97 |
| June | 47 | 54 | 60 |
| July | 30 | 34 | 39 |
| August | 18 | 21 | 24 |
| September | 13 | 15 | 16 |
| October | 12 | 13 | 15 |
| November | 22 | 25 | 28 |
| December | 38 | 42 | 47 |
| Total | 343 | 391 | 439 |
