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Zhou Bicycle Company Case Study Instructions

Zhou Bicycle Company (ZBC) is a wholesale distributor of bicycles located in Seattle. ZBC receives orders from retail outlets within 400 miles of its distribution center and aims to fulfill orders within 2 days from notification. However, if an order cannot be filled, the retailer sources from elsewhere and ZBC loses business. ZBC's most popular and highest revenue model is the AirWing bicycle, which it sources from China with a 4 week lead time. To place an order, ZBC incurs a $65 cost. ZBC is interested in developing an inventory plan for 2013 to maintain a 95% service level and minimize lost order costs using AirWing sales data from the past 2 years.

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805 views1 page

Zhou Bicycle Company Case Study Instructions

Zhou Bicycle Company (ZBC) is a wholesale distributor of bicycles located in Seattle. ZBC receives orders from retail outlets within 400 miles of its distribution center and aims to fulfill orders within 2 days from notification. However, if an order cannot be filled, the retailer sources from elsewhere and ZBC loses business. ZBC's most popular and highest revenue model is the AirWing bicycle, which it sources from China with a 4 week lead time. To place an order, ZBC incurs a $65 cost. ZBC is interested in developing an inventory plan for 2013 to maintain a 95% service level and minimize lost order costs using AirWing sales data from the past 2 years.

Uploaded by

Joli Smith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Zhou Bicycle Company Case Study

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 2013. 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 preceding table. A forecast for AirWing model sales in 2013 has been developed and
will be used to make an inventory plan for ZBC.

Demands for AirWing Model

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 at the level of the planning horizon?

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