1450 Midland Ave – Suite 200 & 300 Scarborough, ON M1P 4Z8 (416) 290-0200 Case Study – Macarry’s Bicycle Company Macarry

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1450 Midland Ave – Suite 200 & 300 Scarborough, ON M1P 4Z8 (416) 290-0200
Case Study – Macarry’s Bicycle Company
Macarry’s Bicycle Company makes and sells high-quality bicycles, primarily to larger North American bicycle retail outlets and to some wholesalers for smaller retail shops. They have several models, and most of those models have a fairly number of options that can be mixed for a very large number of possible designs. The bicycles, for example, can be made in a number of colors, type of seats, number of speed settings (gears), type of tires and wheels, type of brakes, and handlebar styles. In addition, there are several options that can be included or not, including headlights and taillights, water bottle carriers, baskets, or kickstands.
In such an environment, it is clearly difficult to know how much inventory to carry or produce for each of the options. Several years ago, the company decided they could not establish a master schedule for each combination of all the options. That would literally imply creating thousands of master schedules (one for each type of bicycle that is possible to make), and some of those combinations might, in fact, never be ordered. Instead, they decided to make a master schedule for each of the options for a bicycle model and another one for the common parts for the model (for example, a particular model has only one frame, and most of the connectors are common, such as nuts and bots). The common part forecast was based on the total number of bicycles of a model type they planned to sell in a given period, and that allowed them to calculate a forecast for each of the options based on the historical percentage of the model sales that requested that option. Using this approach, a final bicycle would never be produced expect to a specific order from a specific customer.
The cumulative lead time to obtain or make all the parts for the bicycle was 20 weeks, so that is what the company used as their planning time fence. This is important to know since in many parts of the country the sales of bicycles were very seasonal. Bicycle shops in the North sold very few in winter, but in spring the demand was very high. The bicycle shops did not like to keep a lot of inventory of finished bicycles because of the cost and the fact that they did not know from year to year which type of options might be popular. They tended to wait as long as possible to place an order, but then were very sensitive that the order would be delivered in a timely manner. When a customer wanted to buy a bicycle, they did not want to wait, especially since the season was short in some parts of the country.
The following charts show the forecast for one bicycle model (a hybrid heavy-duty bicycle), existing confirmed orders from customers, existing inventory, and master production schedule quantities of the
1450 Midland Ave – Suite 200 & 300 Scarborough, ON M1P 4Z8 (416) 290-0200
common parts and a few of the options for the next 12 weeks. The forecasts for options are computed as follows: The 18-speed gear option was historically selected for this model bicycle 70% of the time. Since the forecast for this model of bicycle for the first week was 50, the forecast for the gear options could be calculated as 35 (70% of 50). The historical percentage of demand for the straight handlebars was 30%, and historically 20% of the orders included the head and taillight set. To understand the orders, for example, the first week there were orders for 56 of this bicycle models – 37 or those orders wanted the 18-speed option, 16 of those orders wanted the straight handlebars, and 2 of those order wanted the light set. This data was taken from the late winter/early springtime frame when the demand for the bicycles was starting to grow as bicycle shops started to prepare for their heavy sales period.
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
MPS
Common parts (Frame, etc.) Existing inventory 40
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
MPS
18-speed gear option Existing inventory 25
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
MPS
Straight handlebars Existing inventory 20
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
50
55
60
62
65
65
68
70
75
75
80
85
56
52
45
33
70
50
35
60
20
20
0
0
20 0
20 0
20 0
20 0
35
39
42
44
46
46
48
49
53
53
56
60
37
38
40
33
50
20
25
40
5
5
0
0
15 0
15 0
15 0
15 0
15
17
18
19
20
20
21
21
23
23
24
26
16
18
20
5
15
22
15
20
5
8
0
0
60
60
60
60
10
11
12
13
13
13
14
14
15
15
16
17
2
12
10
8
15
9
7
11
2
1
0
0
1450 Midland Ave – Suite 200 & 300 Scarborough, ON M1P 4Z8 (416) 290-0200
MPS 30 30 30 30 30 30 Head and taillight set Existing inventory 5
Assignment
1. Fill in the master schedules listed below, taking the data from the above tables and adding row values for projected inventory and available to promise (ATP). Assume there is no demand time fence for this data.
2. Once you have completed the tables, examine the list of orders for this model bicycle and determine specifically what information should be given to the perspective customer. For example, if the order request was for 40 bicycles (with defined options) in week 4 and it appears that only 32 could be delivered, then you should be telling the customer that they can have only 32 in week 4 and then the rest could be delivered at a later week (you should be specific as to WHICH week). Assume the orders listed for evaluation are NOT cumulative – in other words, evaluate each requested order independently ignoring the existence of the other requested orders for the evaluation of this one order.
3. Suppose Macarry’s Bicycle managers discover that a major competitor has had to shut down their production for the next three months due to a major fire. The Macarry’s managers fully expect that many of the competitor’s customer will turn to Macarry’s Bicycles to fill their orders during this critical time for them. In fact, one of the competitor’s customers has already asked about an order of 250 of the models for delivery in week 5. What actions should Macarry’s take in this case? Be as specific as possible.
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
Projected Inventory
MPS ATP
Common parts (Frame, etc.) Existing inventory 40
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
Projected Inventory
MPS
50
55
60
62
65
65
68
70
75
75
80
85
56
52
45
33
70
50
35
60
20
20
0
0
20 0
20 0
20 0
20 0
35
39
42
44
46
46
48
49
53
53
56
60
37
38
40
33
50
20
25
40
5
5
0
0
15
15
15
15
ATP
18-speed gear option Existing inventory 25
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
Projected Inventory
MPS
ATP
Straight handle-bars Existing inventory 20
Week 1 2 3 4 5 6 7 8 9 10 11 12 Forecast
Cust. Orders
Projected Inventory
MPS
ATP
Head and taillight set Existing inventory 5
Here are the orders to evaluate. Again, you are reminded to treat these independently. For example, when you evaluate order number 2, ignore the other order requests (1, 3, and 4), and so forth.
a. A customer is asking about an order of 32 of the bicycles for week 3. All 32 are to be 18 speed, 12 are to have straight handle-bars, and 14 are to have the light set.
b. A customer is asking about an order of 60 of the bicycles for week 6. Fifty of them are to be 18 speed, 12 are to have straight handlebars, and 5 to have the light set.
c. A customer is asking about an order of 20 of the bicycles for week 2. All are to be 18 speed, all are to have straight handlebars, and all are to have the light set.
d. A customer is asking about an order of 110 of the bicycles in week 7. Sixty are to be 18 speed, 22 are to be straight handlebars, and 15 are to have the light set.
1450 Midland Ave – Suite 200 & 300 Scarborough, ON M1P 4Z8 (416) 290-0200
0
0
0
0
15
17
18
19
20
20
21
21
23
23
24
26
16
18
20
5
15
22
15
20
5
8
0
0
60
60
60
60
10
11
12
13
13
13
14
14
15
15
16
17
2
12
10
8
15
9
7
11
2
1
0
0
30
30
30
30
30
30
1450