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ZHOU BICYCLE COMPANY

ZHOU BICYCLE COMPANY. Matthew Ceron Abel Eligio Cindy lopez Jesus Fierro Josh Linker. BACKGROUND ON ZBC. Located in Seattle, ZBC is a wholesale distributor of bicycles and bicycle parts. Formed in 1991 by University of Washington Professor Yong-Pia Zho.

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ZHOU BICYCLE COMPANY

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  1. ZHOU BICYCLE COMPANY Matthew Ceron Abel Eligio Cindy lopez Jesus Fierro Josh Linker

  2. BACKGROUND ON ZBC • Located in Seattle, ZBC is a wholesale distributor of bicycles and bicycle parts. • Formed in 1991 by University of Washington Professor Yong-Pia Zho. • The company distributes a wide variety of bicycle. The most popular model, and the major source of revenue to the company, is the AirWing. • ZBC receives all the models from a single manufacturer in China.

  3. ZBC BUSINESS PROCESS • 1. Retail outlets are located within a 400-mile radius of the distribution center. • 2. These retail outlets receive the order from ZBC within 2 days after notifying the distribution center, provided that the stock is available . • 3. However, if an order is not fulfilled by the company, no backorder is place. • 4. The retailers then arrange to get their shipment from other distributors, and ZBC loses that amount of business.

  4. Business Process • ZBC estimates that each tie an order is placed, it incurs a cost of $65 for communication, paperwork, and customs clearance. • Purchasing price paid by ZBC, per bicycle, is roughly 60% of suggested retail price for all styles of bicycle. • The inventory carrying cost is 12% per year of the purchase price paid by ZBC. Retail price for the AirWing is $170 per bicycle.

  5. Demands for AirWing Model

  6. Discussion Questions • Develop an inventory plan to help ZBC. • Discuss ROP’s and total costs. • How can you address demand that is not at the level of the planning horizon.

  7. An Inventory plan to help ZBC Economic order quantity = Q*omi order quantity = Q*

  8. Demand for AirWing Model

  9. ROP’s and Total Costs • Reorder point (ROP) = Average demand during the lead time ()+Z  (Standard deviation of the demand during the lead time ()) • ROP= 36.58+ 1.645 (25.67)= 79 bicycles • ROP= ()+ Z  () • Safety Stock= 1.645(25.67)= 42 bicycles • Total annual inventory cost= Annual holding cost + Annual ordering cost • = ½ Q* (holding cost) + SS (holding cost) + Total Demand/Q* (Ordering Cost) =$416.16+$514.08+$419.63=$1,349.87 TOTAL COST= $1,349.87

  10. How can you address demand that is not at the level of the planning horizon? • According to the information, the demand shows that it is not a level demand over the planning horizon. Therefore, a EOQ for an entire year should not be used due to seasonal sales. A planning horizon to use might be a quarterly planned horizon because this would be more evenly distributed and help make a plan for each segment.

  11. ZHOU BICYCLE COMPANY THE END

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