Zhou Bicycle Company (ZBC), located in Seattle, is a wholesale 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  from ZBC within 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 bicycles. 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 time an order is placed. With the cost of communication, 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 (paid by the  customers) for the AirWing is $170 per bicycle.  ZBC is interested in making an inventory plan for 2019. 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 2 years are summarized in the following table. A forecast for  AirWing model sales in 2019 has been developed and will be used  to make an inventory plan for ZBC.  Discussion Questions  1. Develop an inventory plan to help ZBC.  2. Discuss ROPs and total costs.  3. How can you address demand that is not level throughout the  planning horizon?

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Zhou Bicycle Company (ZBC), located in Seattle, is a wholesale 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  from ZBC within 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 bicycles. 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 time an order is placed. With the cost of communication, 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 (paid by the  customers) for the AirWing is $170 per bicycle.  ZBC is interested in making an inventory plan for 2019. 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 2 years are summarized in the following table. A forecast for  AirWing model sales in 2019 has been developed and will be used  to make an inventory plan for ZBC.  Discussion Questions  1. Develop an inventory plan to help ZBC.  2. Discuss ROPs and total costs.  3. How can you address demand that is not level throughout the  planning horizon?

 

### Demands for Airwing Model

The table provides data on the monthly demand for the Airwing Model over three years: 2017, 2018, and the forecast for 2019. The data is categorized by month and shows an increasing trend in demand each year.

#### Monthly Breakdown:

- **January**
  - 2017: 6
  - 2018: 7
  - Forecast for 2019: 8

- **February**
  - 2017: 12
  - 2018: 14
  - Forecast for 2019: 15

- **March**
  - 2017: 24
  - 2018: 27
  - Forecast for 2019: 31

- **April**
  - 2017: 46
  - 2018: 53
  - Forecast for 2019: 59

- **May**
  - 2017: 75
  - 2018: 86
  - Forecast for 2019: 97

- **June**
  - 2017: 47
  - 2018: 54
  - Forecast for 2019: 60

- **July**
  - 2017: 30
  - 2018: 34
  - Forecast for 2019: 39

- **August**
  - 2017: 18
  - 2018: 21
  - Forecast for 2019: 24

- **September**
  - 2017: 13
  - 2018: 15
  - Forecast for 2019: 16

- **October**
  - 2017: 12
  - 2018: 13
  - Forecast for 2019: 15

- **November**
  - 2017: 22
  - 2018: 25
  - Forecast for 2019: 28

- **December**
  - 2017: 38
  - 2018: 42
  - Forecast for 2019: 47

#### Total Annual Demand:

- **2017:** 343
- **2018:** 391
- **Forecast for 2019:** 439

The total numbers indicate a consistent growth in demand, forecasting
Transcribed Image Text:### Demands for Airwing Model The table provides data on the monthly demand for the Airwing Model over three years: 2017, 2018, and the forecast for 2019. The data is categorized by month and shows an increasing trend in demand each year. #### Monthly Breakdown: - **January** - 2017: 6 - 2018: 7 - Forecast for 2019: 8 - **February** - 2017: 12 - 2018: 14 - Forecast for 2019: 15 - **March** - 2017: 24 - 2018: 27 - Forecast for 2019: 31 - **April** - 2017: 46 - 2018: 53 - Forecast for 2019: 59 - **May** - 2017: 75 - 2018: 86 - Forecast for 2019: 97 - **June** - 2017: 47 - 2018: 54 - Forecast for 2019: 60 - **July** - 2017: 30 - 2018: 34 - Forecast for 2019: 39 - **August** - 2017: 18 - 2018: 21 - Forecast for 2019: 24 - **September** - 2017: 13 - 2018: 15 - Forecast for 2019: 16 - **October** - 2017: 12 - 2018: 13 - Forecast for 2019: 15 - **November** - 2017: 22 - 2018: 25 - Forecast for 2019: 28 - **December** - 2017: 38 - 2018: 42 - Forecast for 2019: 47 #### Total Annual Demand: - **2017:** 343 - **2018:** 391 - **Forecast for 2019:** 439 The total numbers indicate a consistent growth in demand, forecasting
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