Martin-Pullin Case Study
Module 4 – Chapter 6
Case Study: Martin-Pullin Bicycle Corporation
Martin-Pullin Bicycle Corp. (MPBC), located in Dallas, is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by cousins Ray Martin and Jim Pullin, the firm's primary retail outlets are located within a 400-mile radius of the distribution center. These retail outlets receive the order from Martin-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 communication, 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 bicycle, is roughly 60% of the suggested retail price for all the styles available, and the inventory carrying cost is I % per month (12% per year) of the purchase price paid by MPBC. The retail price (paid by the customers) for the AirWing is $170 per bicycle.
MPBC is interested in making an inventory plan for 2011. 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 two years are summarized in the following table (Table 1). A forecast for AirWing model sales in the upcoming year 2011 has been developed and will be used to make an inventory plan for MPBC.
Table 1
Demands for AirWing model
Month
2009
2010
Forecast 2011
January
6
7
8
February
12
14
15
March
24
27
31
April
46
53
59
May
75
86
97
June
7
54
60
July
Case Study: Martin-Pullin Bicycle Corporation
Martin-Pullin Bicycle Corp. (MPBC), located in Dallas, is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by cousins Ray Martin and Jim Pullin, the firm's primary retail outlets are located within a 400-mile radius of the distribution center. These retail outlets receive the order from Martin-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 communication, 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 bicycle, is roughly 60% of the suggested retail price for all the styles available, and the inventory carrying cost is I % per month (12% per year) of the purchase price paid by MPBC. The retail price (paid by the customers) for the AirWing is $170 per bicycle.
MPBC is interested in making an inventory plan for 2011. 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 two years are summarized in the following table (Table 1). A forecast for AirWing model sales in the upcoming year 2011 has been developed and will be used to make an inventory plan for MPBC.
Table 1
Demands for AirWing model
Month
2009
2010
Forecast 2011
January
6
7
8
February
12
14
15
March
24
27
31
April
46
53
59
May
75
86
97
June
7
54
60
July