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Martin Puller Bicycle

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Martin-Pullin Bicycle Corporation
Martin-Pullin Bicycle Corp. (MPBC), located in Dallas, is a wholesale distributor of bicycles and bicycle parts. Formed in 2000 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 2 days after notifying the distribution center, provided the stock is available. However, if MPBC doesn’t fulfill an order, then 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 its models from a single manufacturer overseas, and shipment takes as long as 4 weeks from the time an order is placed. With the cost of communication, paperwork, and customs clearance included, MPBC estimates that it incurs a cost of $65 per order. The purchase price MPBC pays per bicycle 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 MPBC pays. The retail price (paid by the customers) for the AirWing is $170 per bike.
MPBC is planning inventory for 2004. The firm wants to maintain a 95% service level with its customers to minimize losses on lost orders. The data collected for the last 2 years are summarized in Table 1 as are forecasted Air Wing sales.

Table 1 Demands for AirWing Model Year
Months 2002 2003 Forecast for 2004
January 6 7 8
February 12 14 15
March 24 27 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 27
Totals 343 391 439
DISCUSSION QUESTIONS
1.

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