Concept explainers
Case summary:
Company ZBC is a wholesale distributor of bicycles and bicycle parts situated at City S. The retail outlets of the company are within a 400-mile radius to the distribution centers. The distribution center passes an order to its retail outlets within 2 days after the order is placed by the retail outlets provided the stocks are available.
When there are no stocks, no backorder is taken and the outlets have to arrange the products from some other distributors and the company loses its order. The company distributes a wide range of bicycles and the air wing is the popular brand which is the major source of revenue.
The company receives all of its orders from a single manufacturer and shipment takes 4 weeks from the time of order. Company ZBC estimates the cost for ordering is $65. The purchase price is 60% of the retail price and the carrying cost is 1% per month of the purchase price. The retail price of the air wing is $170. The company wants to maintain a 95% service level to minimize the loss.
To develop: Inventory plan for Company ZBC.
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Principles Of Operations Management
- Describe what is carrying cost in inventory management?arrow_forwardExplain the elements of inventory management ?arrow_forwardZhou Bicycle Company Zhou Bicycle Company (ZBC), located in Seattle, is a whole- sale 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 The company distributes a wide variety of bicycles. The most popular model, and the major source of revenue to the company, is the Air Wing. 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 com- munication, 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…arrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning