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CHAPTER 12 INVENTORY CONTROL MODELS

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Question;CHAPTER 12;INVENTORY CONTROL MODELS;Internet Case Study: Drake Radio;Drake;Radio got its start during World War I by manufacturing radio communications;equipment for the military. By the start of World War II, Drake was one of the;largest suppliers of military communications equipment. After World War II;Drake diversified into the following three market areas;Military;communications equipment;Amateur radio;equipment;CB radios and;equipment;Using;its technology and experience gained from manufacturing military communications;equipment, Drake became known as one of the best producers of amateur radio;equipment. Drake especially excelled with its single sideband radios and its;two-meter radios for amateur use. Although these radios were expensive, they were;of the finest quality and always in demand.;In;developing CB radios, however, Drake decided to mass produce cheap units that;would have a wide appeal and a low price. To help protect its good name in;military communications equipment and amateur (ham) radios, these inexpensive;CB radios were marketed under the brand name of Hustler.;In;1975, George Populas, the president of Drake Electronics, decided to;investigate the possibilities of entering into the market of home stereo;systems. These stereo systems would be high quality, highly priced, and;marketed with the Drake name. The most remarkable stereo system that Drake;manufactured was the DR-2000, which was a sophisticated stereo receiver. The;demand for the DR-2000 was fairly constant from month to month, with demands of;801, 807, 795, and 797 units in January, February, March, and April;respectively.;The;DR-2000 had all the features of a stereo receiver that carried a price tag of;$765. Some of these features included the ability to connect four different;speaker systems, loudness control, flatness control, blend control, and;complete digital read out. Of course, it could be connected to one or more;receivers, tape units, turntables, and so on. Instead of having a bass control;to regulate the low frequencies and a treble control to regulate the high;frequencies, the DR-2000 had five separate controls that regulated five;frequency ranges. One control regulated frequencies from 0 to 500 Hz, another;control regulated frequencies from 500 to 5,000 Hz, a third regulated the;frequencies between 5,000 to 10,000 Hz, a fourth regulated frequencies between;10,000 to 15,000 Hz, and a fifth, the frequencies between 15,000 and 50,000 Hz.;One;of the biggest selling features of the DR-2000 was its ability to use the;DR-2000 RC, the remote control device for the stereo receiver. Because all of;the switching and components were solid state, the engineers of Drake;Electronics were able to develop a complete remote control station that was no;bigger than a cigarette pack. The basic idea for the remote control device was;borrowed from that of television, and Drake engineers were able to control all;functions by the DR-2000 RC. Each remote control box cost $75, and many people;purchased more than one unit. The ability to control the stereo system from;literally anywhere in a house was one of the system's biggest selling features;but it also caused some problems in homes with children. As a result, Drake;developed a master control unit that parents could keep and that would override;all other remote control units and the controls on the stereo receiver.;Another;outstanding feature of the DR-2000 was its completely modular design, shown in;Figure 1. Each module was contained in a completely separate, color coded box.;By unlatching four hidden slides, the top of the cabinet could be removed;giving access to all of the modules.;Figure;1;The;control module contained a microprocessor chip that monitored the operations of;all of the other modules. If one of the modules stopped functioning correctly;the control module would activate a warning light on the front panel that;indicated which module was not working properly. The owner could pull out the;appropriate module and replace it with a new module from a nearby Drake dealership.;If a Drake dealership was not close, Drake promised two-day, COD delivery. The;malfunctioning module could even be sent to Drake or given to a Drake;dealership to be repaired or for a refund.;All;of the modules, except the FM tuner, were manufactured by Drake and stored;until they were needed. Annual carrying cost was estimated to be 25 percent for;all modules. The FM tuner modules were supplied by Collins Electronics, which;also adjusted and sealed them. The cost to place an order was estimated at $50;per order, and the time to receive an order from Collins was approximately two;weeks. Collins also offered quantity discounts on its FM tuners, as shown in Table;1.;Table;1;Quantity Price;0 to 100 $25;101;to 500 $24;501;and over $22;Nitobitso;Electronics also manufactured FM tuners compatible with the DR-2000. Because of;its location in Japan, the time to receive an order was about two months, and;the ordering cost was $100 because of the additional required paperwork. The;quantity discounts offered by Nitobitso is shown in Table 2.;Table;2;Quantity Price;0 to;200 $25;201;to 800 $23;801;to 2,000 $22;2,001;and over $21;1. What is the reorder point for Collins and Nitobitso?;2. Would you recommend that Drake get FM tuners from Nitobitso? Explain;your answer.;3. Everything else being equal, which supplier of FM tuners would you;want with a fluctuating demand?

 

Paper#52944 | Written in 18-Jul-2015

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