Case Study on

Miracle Mind Bicycle

Company

Submitted By:-

AshamDeep Singh Cheema(09020241003)

Deepika Singh(056)
Devendra Chandra(038)
Harshleen Kaur Sawhney(039)
Shubhalaxmi Patil(028)
Sonam Sandilia(065)
Vishal Singla (048)

MIRACLE MIND COMPANY (MC)

Company Overview:

• MC is a wholesale distributer of bicycles & its parts.

• Has a retail outlet within an area of 1000 sq. km.
• These retail outlets receive its order from MC within 2 days.
• Road King is the most popular model.
• If MC fails order is placed elsewhere, thus loss of business for MC.
• MC receives the order from one manufacturer in China.
• The shipment takes 4 - 4.5 weeks from the time of order placement to the
delivery in India.
• Estimated per order cost is Rs. 1000/-.
• About 75% of MRP is the purchase price for MC.
• Average retail price of Road King is Rs 1200/-.

Expectations for 2005

• MC is planning inventory for 2005.

• MC wishes to maintain a 99% service level to keep losses minimum.

Questions

• What are the issues from SCM point of view?

• How do you resolve these issues?
• Develop a comprehensive supply chain?
Actual Sales for Actual sales for Predicted
Months
2003 2004 Demand for 2005
January 1216 1217 1218
February 1222 1224 1225
March 1234 1238 1241
April 1240 1245 1255
May 1260 1270 1278
June 1239 1234 1250
July 1235 1244 1251
August 1236 1235 1239
September 1228 1231 1230
October 1218 1231 1254
November 1225 1230 1235
December 1230 1235 1245
Annual 14921
 Monthly Sales of MMC
1290
1280
1270
1260
No. Of Bicycle(in 1000's)

1250
1240
1230
1220
1210
1200
1190
1180

Actual Sales for 2003 Actual sales for 2004 Predicted demand for 2005

Issues in SCM:

• To satisfy demand during period of replenishment

• To determine the quantity to be ordered.
• To take care of contingencies(Prevent stock outs)
• To economize on buying cost
• To find out if the storage facility is adequate to accommodate the inventory.
• To reduce the lead time.
• To keep pace with the changing market conditions

Solution to the issues:

Inventory carrying cost refers to the cost of holding stocks. in this case it is given to
be 20 %.

Ordering cost includes cost incurred to replenish the stock of an item. It includes paper
work cost, Postage cost, Cost of communication, Customs clearance etc. in this case it
is given to be Rs.1000/Order.\

Cost per unit is the cost price of each unit. In this case Cu= 75% of the maximum retail
price=.75*1200=Rs. 900
Ordering large lots infrequently reduces the administrative work but increases
investment in stocks. Ordering small stock frequently keeps the investment low but
increases administrative work.

So in order to attain maximum efficiency at minimum total cost we need to find out the
optimum quantity to be ordered which we can calculate by finding out EOQ (Economic
Order Quantity)

EOQ= √ (2*A* Cp)/(Cu*I)

Here A= Annual consumption =14921000 units

Cp=Ordering cost per order=Rs. 1000/-
Cu=Cost per unit =Rs. 900/-
I=Inventory carrying cost per year= 20%

EOQ=12896 units/Order.

Average monthly requirement

=14921000/12= 1243417 units/Month.

No. of orders to be placed in a month as per EOQ: 1243417/12896=97

Orders/month.

Safety Stock: It is also called minimum stock or buffer stock is the lower limit below
which the stock should not be allowed to fall under normal circumstances. To prevent
stock out it is important to keep a safety stock: No

Safety Stock= z*SD of Demand*√L

Z (For 99% Service level) = 2.33

L=Lead time = 4.5 Weeks

SD(Standard deviation of demand)=483.64

Therefore, Safety Stock=2.33*483.64/4*√4.5

=598 Units.

Factors effecting safety stock:

 1. Lead Time: Longer the lead time, Higher is the degree of uncertainty. In this case
it is between 4 to 4.5 weeks

2. Number of suppliers: The more the number of suppliers, lesser can be the safety
stock. In our case there is a single supplier so the safety stock should be high or
the company should search for some other suppliers also.

3. Service Level: Higher the service level, higher the safety stock needs to be
maintained. In our case desired service level is 99% which is very high thus
safety stock should be high.

SCM strategy to be implemented:

The following are the recommendations to be implemented for effective supply chain
management

• Company should look out for other suppliers.

• As lead time is very important the company should try and reduce it by
streamline the flow of information, negotiating annual contracts with staggered
deliveries and selecting efficient and faster mode of transport to achieve overall
economic efficiency.
• The company should make use of the EOQ calculated to decide the ordering
quantity and frequency.
• The company should keep a safety stock as calculated above in order to achieve
more than 99% service level.