2. Discuss ROPs and total costs.

Zhou Bicycle Company Zhou Bicycle Company (ZBC), located in Vancouver, is a whole- May 75 86 97 sale distributor of bicycles and bicycle parts. Formed in 1981 by Yong-Pin Zhou, the firm's primary retail outlets are located within June 47 54 60 a 650-kilometre radius of the distribution centre. These retail out- July 30 34 39 lets receive the order from ZBC within two days after notifying the August 18 21 24 distribution centre, provided that the stock is available. However, if September 13 15 16 an order is not fulfilled by the company, no backorder is placed; the retailers arrange to get their shipment from other distributors, and October 12 13 15 ZBC loses that amount of business. November 22 25 28 The company distributes a wide variety of bicycles. The most December 38 42 47 popular model, and the major source of revenue to the company, is Total 343 391 439 the AirWing ZBC receives all the models from a single manufact turer in China, and shipment takes as long as four weeks from the time an order is placed. With the cost of communication, paperwork, ZBC is interested in making an inventory plan for 2019. The and customs clearance included, ZBC estimates that each time an firm wants to maintain a 95% service level with its customers to order is placed, it incurs a cost of $65. The purchase price paid by minimize the losses on the lost orders. The data collected for the ZBC, per bicycle, is roughly 60% of the suggested retail price for all past two years are summarized in the preceding table. A forecast for the styles available, and the inventory carrying cost is 1% per month AirWing model sales in 2019 has been developed and will be used 12% per year) of the purchase price paid by ZBC. The retail price to make an inventory plan for ZBC. (paid by the customers) for the AirWing is $170 per bicycle. Discussion Questions Demands for Air Wing Model 1. Develop an inventory plan to help ZBC. Month 2017 2018 Forecast for 2019 2. Discuss ROPs and total costs. January 6 7 8 3. How can you address demand that is not at the level of the plan- February 12 14 15 ning horizon? March 24 27 31 Source: Professor Kala Chand Seal, Loyola Marymount University. April 46 53 59