Demands for AirWing Model Martin-Pullin Bicycle Corp. (MPBC), located in Dallas, is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by consins Ray Martin and Jim Pullin, the firm's primary retail outlets are located within a 400-mile radius of the distribu- MONTH 2000 2001 FORECAST FOR 2002 January 6. February 12 14 15 tion center. These retail outlets receive the order from Martin- March 27 Pullin within two 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 MPBC 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. MPBC receives all the models from a single manufacturer overseas, and shipment takes as long as four weeks from the time an order is placed. With the cost of commu- nication, paperwork, and customs clearance included, MPBC estimates that each time an order is placed, it incurs a cost of $65. The purchase price paid by MPBC, per bicyde, 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 MPBC. The retail price (paid by the cus- tomers) for the AirWing is $170 per bicycle. MPBC is interested in making an inventory plan for 2002. The firm wants to maintain a 95% service level with its cus- tomers to minimize the losses on the lost orders. The data col- lected for the past two years are summarized in the following table. A forecast for AirWing model sales in the upcoming year 2002 has been developed and will be used to make an inventory plan for MPBC. 24 31 April 46 53 59 May 75 86 97 June 47 54 60 July 30 34 39 August 18 21 24 September 13 15 16 October 12 13 15 November 22 25 28 December 38 42 47 Total 343 391 439 Discussion Questions 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? Source: Profewsor Kala Chand Seal. Layola Marymount University.