Explore BrainMass

Explore BrainMass

    Operations Management and Inventory Plan

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Zhou Bicycle Company, located in Seattle, is a wholesale distributor of bicycles and bicycle parts. Formed in 1991 by University of Washington Professor Yong-Pia 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 with 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 bicycle. 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 times an order is place. With the cost of communication, paperwork, and customs clearance included, ABC estimates that each time an order is place, 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 in interested in making as inventory plan for 2006. The firm wants to maintain a 9.5% service level with is 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 2006 has been developed and will be used to make an inventory plan for ZBC.

    MONTH 2004 2005 FORECAST FOR 2006

    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
    343 391 439

    Questions to be answered:

    1: Develop an inventory plan to help ZBC.
    2: Discuss ROP's and total costs.
    3: How can you address demand that is not at the level of the planning horizon?

    © BrainMass Inc. brainmass.com June 3, 2020, 9:50 pm ad1c9bdddf

    Solution Preview

    1) My recommendation from the inventory perspective would be to maintain a larger inventory than what might be currently being considered. For instance, instead of ensuring an inventory is available from a monthly perspective, I would look at the entire projected sales for the year, and ensure to maintain a 10% inventory on top of the project yearly sales. I base this on the rational that the bikes ...

    Solution Summary

    The solution uses operations management for Zhou Bicycle Company to find determine an inventory plan.