nventory Activity

PART A

Speedy Bicycle Company $($SBC$)$ is a wholesale distributor of a wide variety of bicycles and bicycle parts. The most popular model is

the Dragonfly, which sells for $$180.$ All manufacturing is done at a plant in China, and shipment takes a month $(30$ days$)$ from the

time an order is placed. The estimated order cost is $$75,$ including customs clearance. SBC$$s cost per bicycle is $65\%$ of selling price,

and inventory carrying cost is $11\%$ per year of SBC$$s cost$.$ If the company cannot fulfill a retail order, the retailer will get the

shipment from another distributor and SBC loses that business. SBC is planning inventory for $2023$ based on forecasted demand and

wants to maintain a $93\%$ service level to minimize lost orders. The company has $300$ working days per year.

$2021$ Forecasted Demand for the Dragonfly Bicycle Model:

J F M A M J J A S O N D

$81531589659382316142641$

Develop an inventory plan for the Dragonfly model. Canvas responses shown in red.

Get organized:

Order cost $=$ $$\_\_\_\_\_\_\_\_\_\_$ per order $1$

Cost per bicycle $=$ $$\_\_\_\_\_\_\_\_\_\_\_\_\_($round to nearest cent$)2$

Annual holding cost per bicycle $=$ $$\_\_\_\_\_\_\_\_\_\_3($round to nearest cent$)$

Service level $=\_\_\_\_\_\_\_\_\_\%$ so z $=\_\_\_\_\_\_\_\_\_\_4$

Lead time $=\_\_\_\_\_\_\_\_\_\_$ days $5$

Annual demand for $2023=\_\_\_\_\_\_\_\_\_\_$ bicycles $6$

Answer:

$1.$ What is the economic order quantity? Q $=\_\_\_\_\_\_\_\_\_\_7($round to nearest whole number$)$

$2.$ If average demand during lead time is normally distributed with a standard deviation of $2\mathrm{.}5$ bicycles, what is the reorder point

with the desired service level?

Safety stock $=\_\_\_\_\_\_\_\_\_\_8$ bicycles ROP $=\_\_\_\_\_\_\_\_\_\_9$ bicycles $($round both to nearest whole number$)$

$3.$ What is the total annual inventory cost including safety stock? $$\_\_\_\_\_\_\_\_\_\_\_\_\_\_10($round to nearest dollar$)$

$4.$ If SBC is currently ordering $100$ bicycles at a time, how much is the company overpaying in total inventory cost?

$$\_\_\_\_\_\_\_\_\_\_\_\_\_\_11($round to nearest dollar$)$

$5.$ Each year during their anniversary celebration, SBC offers a collectable water bottle at the special price of $$5.$ They typically sell

$100$ bottles with a standard deviation of $12$ bottles. The cost of each bottle is $$1\mathrm{.}80,$ and any unsold inventory is donated to a local

charity. What is the service level and optimal order quantity for the water bottles?

Service level $=\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\%12$ Optimal order quantity $=\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_13$

$6.$ What is the Dragonfly$$s ADV $($round to nearest $1$ decimal$)?$ If SBC$$s total inventory based on ADV is $$275,000,$ what percent of the

total inventory based on ADV does the Dragonfly represent? $($nearest whole percent$)14$

$7.$ If SBC$$s COGS on its income statement is $$412,500$ and its balance sheet lists inventory at $$83,600,$ what is its IT$?$ If the industry

average is $8$ weeks of supply, how does SBC compare $($better or worse$)?15$

MORE $$

Part B

After watching this $5-$minute video from WSJ $$ Why Everything Is On Sale: The Bullwhip Effect $$ answer the following:

$1.$ The chart showed that retailers traditionally balance $\_\_$ with $\_\_$ by maintaining a sales$/$inventory ratio of about $\_\_\_.$ Now

that ratio is about $\_\_,$ which means $\_\_\_$ inventory turnover. $16$

$2.$ The bullwhip effect was demonstrated in the $$leisure apparel$$ example by demand $\_\_\_\_$ through the supply chain and $\_\_\_\_$

when it was supposed to hit the store shelves. In the past, this type of inventory and the bullwhip effect have been fair

indicators for $\_\_\_,$ but globalization has made it more difficult to forecast. Sales could mean good news because of $\_\_\_\_\_$

or bad news because of $\_\_\_\_.$