Blanchard Importing and Distributing II

1
After his frst year at the Harvard Business School, Hank Hatch
accepted summer employment ith Blanchard Importing and
Distributing, a Boston frm that dealt in the processing and holesaling
of alcoholic beverages! "arly in #une 1$%& Hank met ith 'oby 'yler,
the company(s general manager, ho as a recent graduate of the
Harvard Business School! 'oby described the initial tasks that he
anted Hank to perform)
Hank, during your frst fe days at Blanchard, I(d like you to become familiar
ith the general scope of operations of the frm! As you investigate our
various product lines, I think you ill fnd that the most rapidly e*panding
demand for alcoholic beverages is in the ine market! At the present time e
estimate that e can earn a before+ta* return of &,- on any money e put
into ine merchandising! Hoever, to date, .armen /etrillo, our 0ine Division
manager, and Dave 1ubin, the Sales Department manager, have been unable
to e*ploit this trend due to lack of funds needed to hire e*perienced ine
salesmen and build up an ade2uate inventory of ines! Here is a recent
balance sheet hich shos that e have 3ust about reached the limit of our
borroing capability 4see "*hibit 15! It appears that a reduction in inventory
level is the only substantial source of funds available to us! 'hat(s here you
come in!
After you(ve become ac2uainted ith our operations, I(d like you to spend
some time analy6ing the inventory situation and recommend ays in hich
e can economi6e in that area! Initially, you can look into the method e use
in scheduling production runs of those beverages hich e bottle ourselves!
'he current scheduling system, hich as initiated in 7ctober 1$8$, calls for
bottling of an "conomic 7rder 9uantity :"79; of an item hen the stock level
of that item falls belo a f*ed 1eorder /oint :17/;! 'his 1eorder /oint trigger
level is e2ual to <= eeks( orth of the average eekly demand throughout
the year ending 7ctober <1, 1$8$! I suspect that many of the "79 and 17/
2uantities calculated in 1$8$ should be recalculated based on changes in
annual demand over the past &= years! As a frst assignment you can update
the "79 and 17/ fgures! 0hile you(re at it, keep thinking about ays in
hich e can reduce e*penses and cut back on unnecessarily high stock
levels > any cash hich can be made available for ine merchandising ill be
greatly appreciated by .armen and Dave!
/roduct ?ines
During the frst eek of #une, Hank learned that Blanchard as a full+
line alcoholic beverage house that distributed both imported and
domestic goods including ine, beer, distilled spirits, cordials, and
premi*ed cocktails! Blanchard purchased prebottled goods :called
1
Source) Harvard Business School case $+8%<+,<<! @sed ith permission!
uncontrolled stock; for resale to retail outlets at holesale prices!
@ncontrolled stock accounted for AB- of the frm(s annual sales! 'he
remaining BB- of Blanchard(s revenue as attributed to sale of
controlled stock, those items that Blanchard bottled and sold under its
on brands and private labels!
In #une 1$%& controlled stock consisted of 1BC products that Blanchard
processed in its on bottling facility! 'hese 1BC items ere
diDerentiated by bottle si6e, type and proof of beverage, and brand
label! Blanchard produced &B items in half gallons, 8< in 2uarts, A& in
ffths, 1& in pints, and 18 in half+pints!
.ompany History
'he Blanchard name as originally established as a chain of retail
li2uor stores, the frst of hich as opened in 1$<C by #ohn D! .orey! In
1$B% .orey became interested in holesaling alcoholic beverages and
began distributing case goods to retail outlets! 'o devote his full eDorts
to this ne venture, .orey transferred onership of the chain of
Blanchard retail outlets to other members of his family! In 1$8A the
present arehouse and oEce facility as completed, and in 1$88,
e2uipment as installed to permit the conversion of ra bulk spirits to
bottled goods for sale under the frm(s on brands and private labels!
0hen .orey died in 1$8C, his son, #ohn D! .orey, #r!, assumed
responsibilities as president and treasurer of the company! In #une
1$%&, the frm(s annual revenue as FA million, of hich F< million
represented sales to the seven Blanchard retail stores oned by other
members of the .orey family!
0arehouse ?ayout
Gigure A depicts the layout of the Blanchard arehouse! Host of the
arehouse space as set aside for stocks of bottled case goods! 'hese
areas included a large margin for future grothI actual fnished goods
inventories had never occupied more than B,- of the reserved space!
In addition to the areas set aside for storage of fnished case goods,
space as occupied by to @!S! bonded arehouses and the
rectifcation and bottling e2uipment used for processing controlled
stock! 'he government re2uired that all products imported by
Blanchard, including both prebottled goods and ra bulk spirits, enter
the Blanchard facility by ay of the .ustoms bonded arehouse! In
addition, all the ra bulk spirits that Blanchard purchased for
processing in its bottling operation ere re2uired to pass through the
I1S bonded arehouse prior to rectifcation! 'he Jo of goods into and
out of the to bonded arehouses as closely monitored by federal
oEcials to insure that the re2uired ta* and customs duty obligations
ere met by the company!
.ompetitive Advantage from 7perations /rofessor #uran 2
.onverting 1a Bulk Spirits into Bottled Koods
In preparation for his frst assignment, Hank made a thorough study of
the method used by Blanchard to process controlled stock! Hank
learned that to salaried employees, Bob Loung and "liot 0allace,
ere in charge of this operation! Bob Loung, a skilled machinery
operator, had orked for Blanchard since 1$8$, and "liot 0allace, a
chemistry e*pert ith a degree in food technology, had orked for
Blanchard for seven years! 'he combined annual ages of these to
employees amounted to F&<,,,,! Bob and "liot e*plained that the
conversion process folloed three steps) :1; ithdraal of ra spirits
from bulk storage, :&; rectifcation of the spirits, and :<; bottling the
fnished product!
0ithdraal from Bulk Storage
1a bulk as purchased by the barrel and stored either in the .ustoms
arehouse or the I1S arehouse depending on hether the spirits
ere imported or domestic! 0hen a bottling run called for use of a
particular type of ra bulk, Bob and "liot ithdre the spirits from one
of the to bonded arehouses and pumped it into mi*ing tanks for
rectifcationI imports ere ithdran from the .ustoms arehouse via
the I1S arehouse, incurring both a customs duty and federal distilled
spirits ta* liability, hile domestic spirits incurred only the federal
distilled spirits ta* liability upon ithdraal from I1S arehouse
storage!
.ompetitive Advantage from 7perations /rofessor #uran 3
1ectifcation
1ectifcation of ithdran bulk consisted of diluting the spirits ith
distilled ater to attain the desired proof, mi*ing several diDerent
types of spirits to form combinations such as blended hiskey, and
adding nonalcoholic ingredients to yield cocktails such as scredrivers
and hiskey sours! "liot 0allace as responsible for performing
chemical tests on each rectifed beverage to verify that the appropriate
ratio of ingredients had been established before releasing the
beverage to the bottling line!
Bottling
'he bottling operation utili6ed a fully automated conveyori6ed line of
e2uipment including machines that flled each bottle, screed on a
cap, attached a brand label, and aE*ed the government seal
protecting the consuming public against unauthori6ed opening of a
container folloing bottling! Since 1$88 the demand for controlled
stock items had re2uired operation of the bottling line less than one
out of every three available orking days! Bob Loung as responsible
for maintenance and repair of this e2uipment and verifed the setup of
each machine prior to initiating a bottling run!
Bob Loung and "liot 0allace orked together in completing all
preparations for a bottling run, including the ithdraal and
.ompetitive Advantage from 7perations /rofessor #uran 4
rectifcation of spirits and the setup of the bottling e2uipment for each
si6e and label combination! 0hen preparations ere complete, Bob
and "liot ere 3oined by fve part+time orkers dran from the local
area ho ere each paid F&!B, per hour! 0hile Bob and "liot
supervised overall operations of the bottling line, these fve laborers
packed flled bottles into cartons, labeled and stamped each carton
ith appropriate information, and stacked the cartons on pallets for
transfer to the controlled stock case goods storage area! 'he fve
temporary laborers ere paid soon after completion of the bottling run!
'a* and .ustoms Duty .onsiderations
It as the practice at Blanchard to delay ithdraal of bulk spirits from
storage in the to bonded arehouses until 3ust before the start of a
bottling run to avoid incurring ta* and custom duty liabilities earlier
than necessary! .onse2uently, the length of time beteen ithdraal
of bulk spirits from storage and transfer of the bottled product to
fnished case goods storage never e*ceeded one eek!
In addition to the federal distilled spirits ta* and customs duty charge,
to other ta*es ere levied against alcoholic beverages) a federal
rectifcation ta* as incurred during blending of certain items,
depending on the mi*ing process, and a state ta* as incurred upon
sale of the fnished product by Blanchard! Gederal and state regulations
re2uired the company to pay the customs duty charge, federal
rectifcation ta*, and state ta* ithin a fe days after these liabilities
ere incurred! /ayment of the federal distilled spirits ta*, hoever, as
not re2uired until one month after sale!
"79+17/ Scheduling System
Before making corrections to the "79 and 17/ fgures for each of the
1BC items bottled by Blanchard, Hank located the documents shoing
ho the formal scheduling system as developed in 1$8$! 'hese
records, hich are reproduced in "*hibit &, indicate the general
method used to determine "79 and 17/ 2uantities for each Blanchard
product! During his revie of the system, Hank made the folloing
observations about the inputs to the "79 calculations!
Setup .osts, S
Blending setup cost as based on the annual salaries of Bob Loung and
"liot 0allace and the length of time re2uired for these men to ithdra
the appropriate spirits from bulk storage and complete rectifcation for
a given item!
Si6e changeover cost e2ualed the cost of resetting all machinery for a
change in bottle si6e divided by the average number of diDerent items
of a given si6e processed beteen si6e changeovers! 'he cost of
.ompetitive Advantage from 7perations /rofessor #uran 5
resetting all machines for a change in bottle si6e as based on the
annual salaries of Bob and "liot and the fact that it took these to men
one full day to complete all the machinery ad3ustments re2uired for a
si6e changeover! In a typical year, Blanchard operated the bottling line
for %% days during the year! 'he bottling e2uipment as ad3usted
appro*imately <B times during the year for a change in bottle si6eI
hoever, an average of 1, diDerent items of a given bottle si6e ere
processed beteen si6e changeovers, resulting in about <B, separate
item+bottling runs during the year!
?abel changeover cost as based on the average length of time that
the bottling line as shut don to change from one label to another
label of a same bottle si6e! 'his idle time as assumed to be <,
minutes, consisting of &, minutes to reset the labeling machine and 1,
minutes to restore the labeling machine to continuous error+free
operation folloing the change in labels! Since the part+time bottling
laborers remained idle during the label changeover, the cost of this <,
minutes of don+time as based on both the hourly age rate of these
fve orkers and the annual salaries of Bob and "liot!
7rder+processing cost e2ualed the yearly cost of to oEce orkers
ho earned a combined annual salary of F1C,,,, divided by the total
number of separate item+bottling runs per year! 'hese to clerks
orked full+time processing the customs duty forms, federal ta* forms,
state ta* forms, and other paperork re2uired to support the bottling
operation!
@nit .ost, .
Blanchard used a standard form titled .ost and /rice Data to determine
the holesale price per case of each item! 'his price as based on a
full unit cost fgure that included all direct e*penses incurred in
producing and selling an item plus an allocation of the company(s total
f*ed e*penses! Since the state ta* liability as not incurred until sale
of the fnished product, the unit cost used in the "79 formula as
determined by deducting the state ta* from the full unit cost fgure
shon on the .ost and /rice Data form!
.arrying .ost /ercentage, M
'he only substantial component of the inventory carrying cost as the
cost of capital! "2uity as not considered as a source of funds since all
common stock as privately held by #ohn D! .orey, #r!, ho ished to
maintain full control of the company! As a result, the cost of capital as
assumed to be $-, the prevailing interest rate for debt available to
Blanchard! .omponents of the carrying cost percentage other than
cost of capital ere small and amounted to only &!B-!
.ompetitive Advantage from 7perations /rofessor #uran 6
Scheduling System @sed
Hank decided to make his frst corrections to "79 and 17/ fgures for
the items to be produced during an upcoming bottling run! He learned
that Bob and "liot planned to bottle the items described in 'able A
during the last eek in #une!
Hank then located the .ost and /rice Data forms and the original "79
and 17/ calculation sheets for these fve items and summari6ed the
data in tabular form :see "*hibits < and A;! Hank compared the annual
demand for the year ending 7ctober <1, 1$8$ :see "*hibit A; ith the
monthly sales summary report for the fscal year ending #anuary <1,
1$%& :see "*hibit B; and noted signifcant shifts in demand beteen
the years ending 7ctober 1$8$ and #anuary 1$%&, especially for the
Hac.oy N Hac.oy Scotch and 1on .ores 1um products!
Number of Cases
Item (in quarts) On Hand as of June 20,
1972
To be
Botted
Blanchard(s C, proof Oodka 1AA 1,,,,
Blanchard(s C, proof Kin BB 8,,
Hac.oy N Hac.oy C8 proof
Scotch
BA 8,
'riple % C8 proof Blended
0hiskey
<,1 1&,
Blanchard(s C, proof 1on .ores
1um
AB B,
'able A
7n #une &1 Hank fnished recalculating the "79 and 17/ fgures and
decided to fnd out ho the schedule for the upcoming bottling run had
actually been determined! He found Bob and "liot in the blending area,
here they ere ithdraing corn spirits from the I1S arehouse prior
to rectifcation of 'riple % Blended 0hiskey, and 2uestioned them about
the schedule!
Han!) Ho did you decide on these particular items for ne*t
eek(s run, BobP
Bob) 0ell, every eek the computeri6ed inventory control
system issues us a card for each item that has dropped belo
the <=+eek 17/ stock level! As of yesterday, e had several
half+gallon and 2uart items hich have dropped belo their 17/
levels, including the vodka and gin 2uart products scheduled for
bottling ne*t eek!
Han!) 0hy don(t you bottle both the half+gallon and 2uart items
ne*t eekP
Bob) It takes "liot and me 3ust about one full day to make all the
ad3ustments to the bottling e2uipment re2uired for a si6e
change! .onse2uently, e limit each bottling run to a single si6e
and process several combinations of beverages and labels in that
.ompetitive Advantage from 7perations /rofessor #uran 7
si6e during the run! Since 2uarts are our most popular si6e, e
plan to bottle only 2uarts ne*t eek! 0e(ll try to make a run of
half+gallons in three eeks! Hopefully, the <=+eek advance
notice ill keep us from stocking+out of any half+gallon items!
Han!) 0hat about the rum, hiskey, and Scotch 2uart productsI
ho did they get added to the scheduleP
"iot) After e decided to bottle 2uarts based on the lo gin and
vodka inventories, e checked the stock level for each of the
remaining 81 2uart items! 0e(re going to try to make a run of
2uarts every four eeks for the ne*t to months! So the #une &,
stock level of any 2uart item hich e don(t schedule for bottling
ne*t eek has to last at least si* eeks until the folloing run is
completed at the end of #uly! 'he stocks of Hac.oy Scotch, 'riple
% 0hiskey, and 1on .ores 1um ere all belo the si*+eek level
hen e checked yesterday, so e added them to the list!
Han!) Ho do you minimi6e the length of time that the line is
idle hen you shift from one item to anotherP
"iot) 0e process the lighter beverages frst so that e can
sitch from one item to the ne*t ith only a fe bottles of
distilled ater in beteen to rinse the bottling machine! As a
result, the bottling machine is ready after about only eight
minutes of rinsing! 0e have si*teen tanks for storing rectifed
beverages prior to bottling ith a combined volume e2uivalent to
1,,,,, cases of half+gallons, 2uarts, pints, or half+pints! 'his is
more than enough storage capacity for all items scheduled for a
single bottling run! Since Bob and I fnish rectifcation of all
beverages during the eek before a scheduled bottling run, all
items are ready hen the schedule calls for bottling to begin! Qo
ad3ustment for bottle shape is necessary since e only run one
si6e at a time and each si6e has a standard shape! 'hat leaves
label changeover as the controlling item > right, BobP
Bob) Les, every time e shift from one item to the ne*t, I have to
ad3ust the labeling machine and load in a stack of labels for the
ne item! 'his takes about &, minutes, and during that time, the
fve part+time orkers are idle! 7nce in a hile the labels for to
items in a ro are the same shape, hich permits me to make
the change in about three minutes! At any rate, "liot usually
fnishes purging the bottling machine and completes the shift to
the ne blending storage tank ell before I have the labeling
machine ready to resume bottling!
Han!) 7nce you have decided on the items you intend to bottle
and the order in hich you intend to bottle them, ho did you
determine the number of cases of each item to processP Did you
.ompetitive Advantage from 7perations /rofessor #uran 8
use the "79 fgure that as calculated in 1$8$ hen the
scheduling system as originally developedP
Bob) Qot e*actly, Hank! Since e(ll probably be bottling 2uarts
every four eeks for a hile, e tried to predict hat the
demand for each item ill be beteen runsI then e took into
account the inventory on hand and scheduled production of
enough cases to last until the ne*t scheduled bottling run for
2uarts!
Han!) Ho did you go about predicting hat the demand for
each item ill beP
Bob) 0e used the data from the monthly sales summary 4see
"*hibit B5 to see hat the demand as last month! 'hen e
ad3usted this Hay 1$%& sales fgure by adding a safety factor to
oDset any diDerence beteen sales in Hay and #uly!
Han!) 'hen the planned production volume for each of the fve
items scheduled for bottling ne*t eek represents your predicted
demand for #uly, ith an ad3ustment made for the current
inventory on handP
Bob) Les, e*cept for the gin and vodka! 0e(re fnding it diEcult
to predict accurately demand for these to items because sales
are up substantially from last year! So e(ve decided to bottle
enough gin and vodka to last us to months, through the end of
August! If our predicted sales volumes for gin and vodka are
correct, e can omit production of these products during the #uly
bottling run of 2uarts and save the cost of blending and label
changeover for these to items! Hoever, if demand continues
to spiral and e*ceeds our prediction, e can add these items to
the #uly schedule and avoid a stock+out!
'he day after Hank(s discussion ith Bob Loung and "liot 0allace, 'oby
'yler asked Hank to report on hat he had accomplished on his frst
assignment and to recommend appropriate action based on his
fndings! Hank reali6ed that the scheduling system in use bore little
resemblance to the formal "79+17/ system developed in 1$8$! In
preparation for his meeting ith 'oby, Hank decided to evaluate the
disadvantages of both the original scheduling system and the system
developed by Bob and "liot! Based on this analysis, Hank thought that
he could determine if improvements could be made that ould arrant
adoption of one of the to systems on a permanent basis!
"*hibit 1 Balance Sheet #anuary <1, 1$%& :F thousands;
#ssets "quit$
.urrent assets .urrent liabilities
.ash F&A /ayroll ithheld F1
AR1 :net; AC< @nsecured notes payable C,$
.ompetitive Advantage from 7perations /rofessor #uran 9
Inventory
a
1,,B, Accounts payable 1%<
/repaid e*penses <& Gederal distilled spirits ta*es
payable
<<%
'otal current assets 1,BC$ Accrued ta*es A,
Accrued e*penses 11
Gi*ed assets 'otal current liabilities 1,<%1
/lant and e2uipment net of
depreciation
&C%
1egistered trademarks C ?ong+term debt 8A
'otal f*ed assets &$B 'otal liabilities 1,A<B
Stockholders( e2uity
.apital stock 1,,
1etained earnings <A$
'otal assets F1,CC
A
'otal e2uity F1,CC
A
a! Inventory as subdivided into the folloing categories :in cases;)
Ginished case goods :uncontrolled stock; <11
Ginished case goods :controlled stock; <8&
.ustoms bond :ra bulk and uncontrolled fnished case goods
stock;
1%1
I1S bond :ra bulk; 1%B
Hiscellaneous :bottles, cartons, labels, Javors, etc!; <1
.ompetitive Advantage from 7perations /rofessor #uran 10
"*hibit & "79 and 17/ .alculations
EOQ
CK
RS &
= ROP
R
.
=
B&
B <
%&ere'
#nnua demand, ('
Demand for an item for year ending 7ctober <1, 1$8$, in cases of bottles
)etu* +ost, )'
Setup cost per bottle run of an item
S S Blending setup cost T si6e change cost T label change cost T order
processing cost
Blending setup cost S Actual cost of labor for blending during rectifcation and
is diDerent for each item
Si6e changeover cost S Actual cost of labor to reset all machines for a change
in bottle si6e and is a constant FC!CB for all 1BC items
?abel changeover cost Average cost of labor to reset labeling machine for a
change in labels and is a constant F11!%C for all 1BC items
7rder processing cost S Average cost of administrative labor to process an
order for a bottling run and is a constant FB1!A< for all 1BC items
,nit +ost, C'
.ost per case of bottles of an item after bottling and packaging
. S Haterials cost T bottling labor T f*ed overhead allocation T variable
overhead T customs duty T federal distilled spirits ta* T federal rectifcation
ta*
Haterials cost S .ost of ra bulk, bottles, caps, and labels
Bottling labor S .ost of part+time bottling line labor per case of bottles
produced and is a constant F,!1, per case for all 1BC items
Gi*ed overhead allocation S 'otal company f*ed overhead for the year divided
by the number of cases sold per year and is a constant F1!<1 per case for all
1BC items
Oariable overhead S 'otal direct e*pense :other than material and direct labor
costs; resulting from production of one case of an item and is a constant F,!B,
per case for all 1BC items
.ustoms duty S .harge on imported spirits and varies ith alcoholic content
Gederal distilled spirits ta* S I1S ta* on all spirits sold in the @nited States and
varies ith the alcoholic content of the beverage
Gederal rectifcation ta* S I1S ta* on certain mi*ed beverages and varies ith
the alcoholic content of the item
Carr$in- +ost *er+enta-e, .'
/ercent of average inventory value hich represents annual cost of carrying
inventory of an item
M S .ost of capital T other carrying costs
.ost of capital S $- for all items
7ther carrying costs, including estimated costs of obsolescence, shrinkage,
insurance, and year+end inventory ta* S &!B- for all items
.ompetitive Advantage from 7perations /rofessor #uran 11
"*hibit < .ost and /rice Data Summary :dollars per case;
Blanchard(s
C,
/roof Oodka
Blanchard(s
C,
/roof Kin
Hac.oy N Hac.oy
C8 /roof Scotch
'riple % C8
/roof Blended
0hiskey
Blanchard(s C,
/roof 1on .ores
1um
0holesale price FA<!$$ FA<!$$ FB%!<$ FA$!C% FA%!<$
Haterials>beverage !$< 1!,C A!A8 &!B& &!%A
Haterials>packaging 1!&% 1!&% 1!&% 1!&% 1!&%
Direct labor !1, !1, !1, !1, !1,
State ta* 1,!,C 1,!,C 1,!,C 1,!,C 1,!,C
Gederal distilled spirits
ta*
&B!&, &B!&, &%!,$ &%!,$ &B!&,
Gederal rectifcation ta* !%8
.ustoms duty 1!BB
Oariable overhead !B, !B, !B, !B, !B,
Gi*ed overhead
allocation
1!<1 1!<1 1!<1 1!<1 1!<1
Gull unit cost <$!<$ <$!BA A8!<8 A<!8< A1!&,
/roft before income ta* A!8, A!AB 11!,< 8!&A 8!1$
"*hibit A "79 and 17/ .alculation Sheet Data
"79 17/
Blending
Setup .ost
All 7ther
Setup
.osts
'otal Setup
.ost :S;
Annual
Demand
:1;
- .arrying
.ost :M;
@nit
.ost .
a
CK
RS &
R
.

B&
B <
Blanchard(s C, proof Oodka F1!1B F%&!,8 F%<!&1 &,ABB 11!B- F&$!<1 <&% 18B
Blanchard(s C, proof Kin 1!,C %&!,8 %<!1A 1,A&1 11!B &$!A8 &AC $8
Hac.oy N Hac.oy C8 proof
Scotch <!&A %&!,8 %B!<, C,, 11!B <8!&C 1%, BA
'riple % C8 proof Blended
0hiskey &!8& %&!,8 %A!8C <,,$8 11!B <<!BB <A8 &,C
Blanchard(s C, proof 1on .ores
1um &!<< %&!,8 %A!<$ AA$ 11!B <1!1& 1<% <,
a! @nit cost :.; S Gull unit cost :see "*hibit <; minus state ta* :see "*hibit <;
.ompetitive Advantage from 7perations /rofessor #uran 12
.ompetitive Advantage from 7perations /rofessor #uran 13
Exhibit 5: Monthly Sales Data, Febrary 1971 ! May 1972
Cases of /uart Bottes
0eb 1ar #*r 1a$ Jun Ju #u- )e* O+t No2 3e+ Jan
4ear
Tota
Oodka
1$%1 1&C 1<8 &<< &1$ &CA <A< <8C &<, 18& &A8 &B& 11A &,%1B
1$%& &1, <,< &%B A8<
Kin
1$%1 B1 B& %A 1B% 1B, &B% 1%$ C< %& C$ 1C1 A& 1,<C%
1$%& 188 1A& 1<< &1<
Scotch
1$%1 %$ C& 1B1 88 1&% $8 CB 81 8% 1,< 1<1 <$ 1,,C%
1$%& C& 8C 88 <C
0hiskey
1$%1 18< 1C, 1$C 1C< &1% &,% 1C8 1%1 &,B &88 &B% 8BA &,CC%
1$%& 1%% 18< 18& &B8
1um
1$%1 1, <A AA &8 << <B B1 18 1B &8 A< && <BB
1$%& 11 &C 81 BB
.ompetitive Advantage from 7perations /rofessor #uran 14
Assignment)
1ead, analy6e and be prepared to discuss the Blanchard .ompany case
using the folloing study guide 2uestions)
1! Determine hich costs should be included to perform the "79R17/
calculations!
&! 0hat are the assumptions of the "79R17/ model that Blanchard
hasP
<! BrieJy describe the inventory system designed by Bob and "lliot!
A! "valuate this system by identifying the ma3or advantages and
disadvantages!
B! 0hat are Blanchard(s shortage costs for its productsP
8! .an you oDer any suggestions for improving Blanchard(s
operationsP
.ompetitive Advantage from 7perations /rofessor #uran 15