Case Study 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 firms primary retail outlets are located within a 400-mile radius of the distribution center. These retail outlets receive their orders 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.
Demands for Air Wing Model
MONTH 2014 2015 FORECAST FOR 2016
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
The company distributes a wide variety of bicycles. The most popular model, and the major source of revenue for 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 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 two years are summarized in the accompanying table. A forecast for AirWing model sales in 2016 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?
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