Martin-Pullin Bicycle Corporation is a leading manufacturer of bicycles and bicycle parts. The company has an extensive inventory of products, including frames, wheels, tires, and other accessories.
Martin-Pullin uses an economic order quantity (EOQ) model to determine the optimal quantities to order and stock. This model takes into account the cost of holding inventory, the cost of ordering, and the demand for the product. By using the EOQ model, Martin-Pullin is able to minimize its costs and maximize its profits.
The company offers a wide range of prices for its products, making it accessible to a variety of customers. Additionally, Martin-Pullin provides discounts for bulk orders, making it an attractive option for businesses and organizations.
Martin-Pullin is committed to providing high-quality products and excellent customer service. The company has a team of experienced professionals who are available to answer any questions you may have about the products or the ordering process.
Whether you’re looking for a single bicycle or a thousand, Martin-Pullin is the place to go. With its extensive inventory, competitive prices, and commitment to customer satisfaction, you’re sure to find what you’re looking for at Martin-Pullin.
Martin-Pullin Bicycle Corp, founded in Dallas by cousins Ray Martin and Jim Pullin in 1981, sells bicycles and bicycle parts to retailers within a 400 mile radius of the distribution center. Usually, if stock is available, notification of an order from a retailer reaches the distribution center within two days.
If the item is not in stock, it is drop-shipped from the manufacturer directly to the customer. In addition to its primary market area, MPBC also ships orders to retailers located outside of this area, although such orders are subject to a minimum order fee of $250 and a shipping charge of $25.
MPBC’s inventory system is designed to fill 95% of all orders from stock. To achieve this level of customer service, MPBC must maintain an inventory that is large enough to meet customer demand but not so large that it ties up too much capital in inventory. This is known as the economic order quantity (EOQ). The EOQ model is a tool that helps businesses determine the optimal level of inventory to maintain.
The EOQ model takes into account the following variables:
– The demand for the product (D)
– The cost of placing an order (K)
– The cost of holding one unit of inventory in stock for one year (h)
Using these variables, the EOQ formula is as follows:
EOQ = √(2DK/h)
For example, if the demand for a particular item is 1,000 units per year, the cost of placing an order is $100, and the cost of holding one unit of inventory in stock for one year is $10, then the economic order quantity would be:
EOQ = √(2 x 1,000 x 100/10)
EOQ = 100 units
This means that the company should order 100 units of the product at a time in order to minimize the cost of inventory.
The EOQ model is just one tool that businesses can use to determine their inventory levels. Other factors, such as the price of the product, may also influence the decision. In general, though, the EOQ model is a good starting point for managing inventory.
However, if the firm fails to fill an order, no backorder is created; retailers contact other distributors and MPBC loses that amount of income. The AirWing is the most popular bike and provides the greatest source of money to the firm.
The AirWing is a lightweight, alloy-framed bicycle with STI shifters and Shimano derailleurs. It has 26-inch wheels and weighs about 25 pounds.
The company also manufactures a line of children’s bicycles, as well as a line of mountain bikes.
In order to increase sales, MPBC has begun offering free shipping on all orders over $100. The company has also started an inventory management program in which it uses an economic order quantity model to minimize the cost of holding inventory. By utilizing these methods, MPBC has been able to increase its sales and profits significantly.
The MPBC handles all of the models from a single manufacturer outside of the United States, and delivery takes approximately four weeks since an order is placed. MPBC believes that each time an order is placed, it costs $65 in communication, paperwork, and customs clearance fees.
MPBC pays approximately 60% of the suggested retail price for all styles of bicycles available, and the inventory carrying cost is 1 % per month (12% per year) of the purchase price paid by MPBC. The retail price for AirWing bicycles that customers pay is $170 each.
The AirWing bicycle is one of the most popular models that MPBC sells, and the company wants to maintain a three-month supply of this model on hand at all times. Determine the economic order quantity for the AirWing model.
MPBC wants to create an inventory plan for 2011 in order to keep a service level of 95% with customers and avoid losses from unfulfilled orders. The table below shows data collected over the past two years, which will be used to forecast sales of AirWing models in 2011 and help MPBC form its inventory strategy.
MPBC should maintain a 95% service level with its customers to minimize the lost order. The firm also wants to keep the inventory low to reduce the cost associated with holding inventory. Based on the data and forecast collected, MPBC should order 18,000 bicycles in 2011. This will allow the company to have a service level of 95% and keep inventory low.
– Service level: 95%
– Order quantity: 18,000 bicycles
– Lowest point in stock: 9,000 bicycles
– Reorder point: 10,500 bicycles
– Order quantity: 18,000 bicycles