Northcutt Bikes Case Study

1074 Words May 11th, 2015 5 Pages
Executive Summary
Northcutt Bikes is a bike manufacturer and a service provider of bike parts to the many retail businesses that sell Northcutt bikes. Northcutt Bikes has a warehouse that is 95% utilized however they have an order fulfillment rate of less than 80%. This has caused a loss of revenue due to orders being cancelled when needed parts are not in stock. To resolve the problem, we looked at 3 alternatives including establishing pooling groups within the same geographic region, establishing a continuous review inventory management system or staying the course. Our recommendation is to establish a continuous review inventory system that will reduce unnecessary inventory, increase needed inventory and improve service levels.
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However, one problem that needs to be addressed is how to solve the conflict of pooling groups’ demand.
2. Another possible solution is that Northcutt Bikes could develop an information system that helps retail business divide the safety stocks of these items among themselves. To be specific, through sharing inventory information to retail business, Northcutt Bikes still owns controlling inventory management, including inventory types, quantity and timing of orders, and inventory ownership still belongs Northcutt Bikes. As a result, Northcutt Bikes can reach a win-win goal reducing inventory costs and improving service standards.
3. If Northcutt Bikes prefers to stay the current inventory strategy, then it should be aware that purpose of each inventory location should be distinguished according to the importance of parts. For example, some inventory locations should address retailers’ demands and the upstream should fulfill replenishment needs to Northcutt Bikes steady and normally.

Recommended Solution
In order to meet both of Northcutt’s objectives of reducing inventory and increasing service levels, Northcutt should implement a continuous review system to manage inventory. Based on the calculations provided in question 2 of the appendix, managers at Northcutt will need to set the reorder point for part FB378 at 118 units and 296 units for part GS131 for the
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