Presentation on theme: "MATTHEW CERON ABEL ELIGIO CINDY LOPEZ JESUS FIERRO JOSH LINKER ZHOU BICYCLE COMPANY."— Presentation transcript:
MATTHEW CERON ABEL ELIGIO CINDY LOPEZ JESUS FIERRO JOSH LINKER ZHOU BICYCLE COMPANY
BACKGROUND ON ZBC Located in Seattle, ZBC is a wholesale distributor of bicycles and bicycle parts. Formed in 1991 by University of Washington Professor Yong-Pia Zho. 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.
ZBC BUSINESS PROCESS 1. Retail outlets are located within a 400-mile radius of the distribution center. 2. These retail outlets receive the order from ZBC within 2 days after notifying the distribution center, provided that the stock is available. 3. However, if an order is not fulfilled by the company, no backorder is place. 4. The retailers then arrange to get their shipment from other distributors, and ZBC loses that amount of business.
Business Process ZBC estimates that each tie an order is placed, it incurs a cost of $65 for communication, paperwork, and customs clearance. Purchasing price paid by ZBC, per bicycle, is roughly 60% of suggested retail price for all styles of bicycle. The inventory carrying cost is 12% per year of the purchase price paid by ZBC. Retail price for the AirWing is $170 per bicycle.
Demands for AirWing Model
Discussion Questions 1. Develop an inventory plan to help ZBC. 2. Discuss ROP’s and total costs. 3. How can you address demand that is not at the level of the planning horizon.
An Inventory plan to help ZBC Economic order quantity = Q*omi order quantity = Q*
Demand for AirWing Model
ROP’s and Total Costs Reorder point (ROP) Average demand during the lead time ( ) Z (Standard deviation of the demand during the lead time ( )) ROP= ( )+ Z ( ) ROP = (25.67)= 79 bicycles Total annual inventory cost= Annual holding cost + Annual ordering cost Safety Stock = 1.645(25.67)= 42 bicycles = ½ Q* (holding cost) + SS (holding cost) + Total Demand/Q* (Ordering Cost) =$ $ $419.63= $1, TOTAL COST= $1,349.87
How can you address demand that is not at the level of the planning horizon? According to the information, the demand shows that it is not a level demand over the planning horizon. Therefore, a EOQ for an entire year should not be used due to seasonal sales. A planning horizon to use might be a quarterly planned horizon because this would be more evenly distributed and help make a plan for each segment.