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The northcuts bikes, the service department Case Solution

Inventory policy (Q,R)

The inventory policy used to effective manage the levels of inventing in the service department is (Q, R). Which involves the used to replenishment techniques, in which, the reorder level is determined and maintained and if the inventory levels at any point in time meet or decrease less than the reorder level calculated, then the inventory is replenished with appropriate inventory Quantity known as reorder quantity. Which would enable the service department to keep the inventory costs low, benefiting from the decrease in their inventory holding cost and which would allow them to continues business operation using the same area of production warehouse, without gaining additional costs from the purchase of excess warehousing space. However, the reorder level and reorder quantity for both the service parts are illustrated in the Exhibit-1 and 2 below. In which, FB378 represents Fender Brackets and GS131 represents Gear Sprocket. Furthermore, the data of annual demand was given on weekly basis, therefore, the reorder quantity and reorder levels were also calculated on a weekly basis.

Exhibit-1

Week Actual Demand (FB378) Reorder Level (FB378) Reorder Quantity (FB378)
1 34 4                                                 49
2 44 8                                                 55
3 33 12                                                 48
4 39 16                                                 52
5 48 20                                                 58
6 30 24                                                 46
7 26 28                                                 43
8 45 32                                                 56
9 33 36                                                 48
10 30 40                                                 46
11 47 44                                                 57
12 40 48                                                 53
13 31 52                                                 47
14 38 56                                                 52
15 32 60                                                 47
16 49 64                                                 59
17 24 68                                                 41
18 41 72                                                 54
19 34 76                                                 49
20 24 80                                                 41
21 52 84                                                 60
22 41 88                                                 54
23 30 92                                                 46
24 37 96                                                 51
25 31 100                                                 47
26 45 104                                                 56

 

 

weekly

weekly

Exhibit-2

Week Actual Demand (GS131) Reorder Level (GS131) Reorder Quantity (GS131)
11 16 96                                                 15
12 27 162                                                 19
13 35 210                                                 22
14 52 312                                                 27
15 51 306                                                 27
16 44 264                                                 25
17 57 342                                                 28
18 59 354                                                 29
19 46 276                                                 25
20 62 372                                                 29
21 51 306                                                 27
22 60 360                                                 29
23 46 276                                                 25
24 58 348                                                 28
25 42 252                                                 24
26 57 342                                                 28

As it can be assessed from the Exhibits above that, the company’s service should maintain updated inventory records so that the inventory could be tracked. Which would enable the department to determined, whether the inventory level are above or below the reorder level calculated. Where, if the inventory levels meets the reorder level calculated, than this indicates that the inventory should be reordered to replenish the stocks and maintain the appropriate level of inventory. Which could enable the company to fulfill its customers’ orders efficiently, increasing their levels of satisfaction. However, it can be assessed that for service part FB378, that the reorder level for week one amounts to 4 unit and reorder quantity amounts to 49 units, whereas the annual demand amounts to 34 units. Which means that, if the inventory level decreases to 4 Units than the appropriate reorder quantity would be 49 units. Additionally, the reorder levels and reorder quantities for 24 weeks were calculated with respect to service part FB378. Moreover, for GS131, the reorder level amounts to 96 units and the reorder quantity amounts to 15 units, whereas the annual demand for Week-1 amounts to 16 units. Which means that, if the inventory level decrease below 96 units than the appropriate level of reorder quantity would be 15 units. Which would enable the service department to fulfil the requirement of its customers. Additionally, the reorder quantity and reorder level were calculated with respect to GS131..........................

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