Demand in Operations

Problem Statement

Blanchard importing and distribution is a full-line alcoholic beverage house that distributed both imported and domestic goods including wine, beer, distilled spirits, cordials and premixed cocktails. Blanchard was first opened in 1938 by John D. Corey and in 1957 entered into the business of wholesaling alcoholic beverages and began distributing case goods to retail outlets. In June 1972, the firm’s annual revenue was $4 million, of which $3 represented sales to the seven Blanchard retail stores.

The current scheduling system, which was initiated in October 1969, calls for bottling of an Economic Order Quantity (EOQ) of an item when the stock level of that item falls below a fixed Reorder Point (ROP). This Reorder Point (ROP) trigger is equal to 3.5 weeks’ worth of the average weekly demand throughout the year ending October 31, 1969. One of the issues faced by Blanchard was that the Reorder Point (ROP) is not adjusted to take care of annual demand change over the past 2.5 years. The EOQ and ROP points need to be recalculated to adjust