Discussion Question:

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?

2009 price a single manufacturer overseas, and shipment takes as long 26 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 incursa 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% MPBC is interested in making an inventory plan for 2011. The firm wants to maintain a 95% service level with its custom 236 CHAPTER 6. INVENTORY CONTROL MODELS Demands for AirWing Model MONTH 2010 FORECAST FOR 2011 January 6 7 8 February 12 14 15 March 24 27 31 April 46 53 59 per year) of the purchase price paid by MPBC. The retail (paid by the customers) for the AirWing is $170 per bicycle. May 75 86 97 June 47 54 60 July 30 34 39 ers to minimize the losses on the lost orders. The data collected August 18 21 24 for the past two years are summarized in the following table. A forecast for AirWing model sales in the upcoming year 2011 September 13 15 16 has been developed and will be used to make an inventory plan October 12 13 15 for MPBC. November 22 25 28 Discussion Questions December 38 42 47 Total 343 391 439 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 The company distributes a wide variety of bicycles. The planning horizon? most popular model, and the major source of revenue to the Source: Professor Kala Chand Seal, Loyola Marymount University. ompany, is the Air Wing. MPBC receives all the models from