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NorthCutt Bikes

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by

Andreas Nico

on 24 March 2014

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Transcript of NorthCutt Bikes

Data Analysis
Background
Questions
Answers
UPH Surabaya 2011
.
Background
FB378
GS131
Forecast, Demand
Forecast, Demand
Northcutt Bikes was a company that provides tires, seats, chain, etc for bikes. This company has a lacks of understanding in managing the material management, especially in inventory. To solve this problem, she hires Mike Alexander to help her to minimize and solve this lacks in the company.
Customer order was less than 80%. From the remaining orders was back ordered. Mike decided to started his analysis and investigation, because he felt that he could solve and improve the company with those two parts, FB378 (Fender Bracket) and GS131 (Gear Sprocket 131).
FB378
L = 3 weeks
S = 35 dollars
Q = 120
Price = 5 dollars

Work Experience
PLATFORMS
Social
SOCIAL
SEO
CMS
Northcutt Bikes
Supply Chain Management of
Andreas Nico
Bezaleel Hadinata
Imanuel Judah
Northcutt Bikes
Question
1. Use the available data to develop inventory policies (order quantities and reorder points) for the FB378 and GS131. Assume holding cost is 20% of unit price. Be sure to state all assumptions and justify your choices (HINT: it might be helpful to see how your answers change, depending on the assumptions you make).
Question
2. Compare the inventory costs associated with your suggested order quantities with those of the current order quantities. What can you conclude?
Question
3. Do you think the lost customer sales should be included as a cost of inventory? How would such an inclusion impact the ordering policies you established in question 1?
Thank You!!!

Best Regards :

Bezaleel Hadinata
Imanuel Judah
Andreas Nico
GS131
L = 6 weeks
S = 15 dollars
Q = 850
Price = 10,75

Case(s)
Case(s)
GS131
L = 6 weeks
S = 15 dollars
Q = 850
Price = 10,75
H = 20% 10,75 = 2,15

Z = 1,65 (95% service level)

There’s no deviation of lead time

Average demand: 46,59

Q= 108.90 rounded up 109

FB378
L = 3 weeks
S = 35 dollars
Q = 120
Price = 5 dollars
H = 20% x 5 = 1 dollars

Z = 1,65 (95% service level)

There’s no deviation of lead time.

Average demand : 36,85

Q= 91.6
Rounded up = 92


FB378:
Current order quantity: 120 units
Current annual holding cost: $60.00
Current annual ordering cost: $35.00
Curent cycle = 120/2. 60
= 3600
EOQ=92 units
ROP= 118
Cycle EOQ = 92/2 . 60
= 2760

Safe = 840 dollars

GS131
Current order quantity: 850 units
Current annual holding cost: $913.75
Current annual ordering cost: $15.00
Current cycle = 850 / 2 x 2,15 = 913,75
EOQ= 109 units
ROP= 296.57

EOQ cycle = 109 / 2 x 2,15 = 117,175

Safe = 796, 575

With EOQ Northcutt Bikes can get a lower inventory cost. So we can conclude that EOQ and ROP really helps to get more efficient prices and bigger profit because it’s make the system in inventory more effective. Beside it also doesn’t back order, so the system is better than using the old one
Yes. Because the demand of those products will affect the calculation in no 1. If the demand is increasing, the ROP and EOQ will also increasing and when it decreasing, the ROP and EOQ will also decreasing based on the formula. Beside companies have two primary inventory cost drivers:

1) High Inventory Holding costs: When they hold inventory for too long and must cover financing costs, obsolescence, damage etc.

2) Lost sales cost of inventory: When they miss sales due to inventory stock outs and low inventory counts.

If the sales are lost, there will be an additional cost for the inventory cost.

Case(s)
Full transcript