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Northcutt Bikes Case Study


Submitted By tilmon
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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.

Description of the main problems/major issues in the case
Northcutt Bikes’ service department has grown significantly in recent years. However, the inventory is being mismanaged as evidenced by the 95% utilization of warehouse space and order fill rate of less than 80%. Northcutt Bikes needs to develop an inventory management system capable of moving their service level from less than 80% to 95% or better without backorders while creating a net reduction in total inventory.

Analysis of Alternatives
Northcutt Bikes inventory items belong to continuous review system because it will update and monitor inventory levels, when inventories drop to reorder point, it will be ordered immediately. As Ann Hill indicated in the case study (Bozarth and Handfield, 2008) that inventories have been too much; however, the firm’s service level is even under 80%. She hopes the firm could improve to a 95% or better service level without having to backorder parts. The timing and quantities were misplaced. For the options, we have developed the following alternatives:
1. Establishing “pooling groups” in the same geographic region, sharing safety

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