NorthCutt Bikes: The Service Department Case Solution

NorthCutt Bikes: The Service Department Case Solution

Introduction& Problem Identification

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Jan Northcutt is the owner of the company and is dealing in both service and manufacturing industry. With the growth of the business she is considering designing a separate service department as this department is contributing about 15% revenue among the total revenue. Therefore, by looking at the demand and growth of this department she appointed Ann as the manager of the service department. It is expected that service department deals in both distribution and after sales services of tires, seats and chains.

It is expected that Ann is an effective manager but does not has the ability to overcome the problem of forecasting that the company is currently facing with respect to material handling. In order to deal with this problem, she hired Mike and he considered that there is a significant potential of growth, which could be achieved by taking certain corrective measures such as by establishing appropriate forecasting models and reorder levels in order to manage the inventory. Currently, the company is satisfying the need of only 80% customers and it is expected that the company is facing the critical issue of 20% back orders, which increases holding cost and reordering cost significantly which results in a decrease in profit margin of the company. Therefore, Mike considered that by increasing the customers’ satisfaction and decreasing the ratio of the back order he could resolve this issue.

Forecasting Model

It is expected that demand of the company is seasonal and it is fluctuating significantly within weeks. In order to overcome this problem Mike decided to analyze the demand of the two products of the company FB378 and GS131. By analyzing the demand of these two products Mike considered that currently the company is not using any forecasting technique in order to avoid uncertainties with respect to the future demand of the products.

In order to deal with this problem, it is expected that Mike could use a simple forecasting methodology. By using the forecasting techniques,Mike could predict the future demand of the products which could assist the management of the company by enhancing the ability of the company with respect to material and inventory management.

It is expected that by using average method of forecasting, Mike could predict the future demand of these two products and of other products, which are in the product range of the company. By applying average forecasting model of these two products, it is expected that the demand of FB378 for 27th week is 35.6 units and of GS131 is 46.59 units………………

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