# Blanchard

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Case Analysis: Blanchard Importing and Distributing Co. Inc. (HBS Case 9 - 673 - 033)
Submitted by: Tushar Kothavale (130)

NMIMS, FT MBA 2009-2011

1) Correct the Economic Order Quantity (EOQ) and Reorder point (ROP) quantities for each of the five items mentioned in the case.
We first predict the annual demand for the year 1972 based on trend for 4 months of 1972 based on corresponding months of 1971.
Calculations for Annual demand (R):
The assumption made here is that the same trend for sales as that for the four months of
1972 would be followed for the rest of the months of the 1972.

Sales prediction for annual demand for year 1972
Total Sales

Feb

Mar

Apr

May

1971
1972

128
Which system do you prefer?
EOQ/ ROP system:
Advantage1) The system achieves the balance between two costs ordering cost and the carrying cost. 2) The system keeps track of removals from inventory on a continuous basis, so the system can provide information on the current level of inventory for each item
3) The system helps meet the anticipated customer demand.
4) The system keeps buffers between successive operations to maintain continuity of production (reducing the variability in demand at various stages).

Disadvantage1) EOQ/ROP system is essentially a reactive approach; this approach gives only an order quantity, it does not suggest ways to reduce the inventory.
4

2) For implementation of EOQ a perpetual inventory counting system needs to be in place, this implies substantial investments which might not be feasible for some.
3) Even if EOQ system is in place there is necessity to physically count the inventory periodically in order to ascertain the accuracy of the system.
4) EOQ/ ROP is a static system that is, it does not change automatically with the change in demand. For every period a new EOQ/ ROP needs to be established.
5) It is valid for a single product and not a basket of products. (Assumption made while deriving the EOQ/ ROP.)
6) It does not take into account