Blanchard Importing and Distributing Co., Inc.

About Company

The Blanchard retail liquor stores was a full-line alcoholic beverage house that distributes both
imported and domestic goods including wine, beer, distilled spirits, cordials, and premixed
cocktails and was first opened in 1938 by John D. corey In 1957 Corey became interested in
wholesaling alcoholic beverages and began distributing case goods to retail outlets. So corey
transferred ownership of the chain of Blanchard retail outlets to other members of his family In
1966, equipment was installed to permit the conversion of raw bulk spirits to bottled goods for
sale under the firm’s own brands and private labels In 1968, after the death of Corey his son,
John D. Corey, Jr., assumed responsibilities as president and treasurer of the company Blanchard
has 8 retail stores, of which 7 are owned by other members of Corey family and accounts to $3
Million out of total $4 Million annual revenue

Problem statement:

Carmen Petrillo, Wine Division manager, and Dave Rubin, the Sales Department manager, have
been unable to exploit trend due to lack of funds needed to hire experienced wine salesmen and
build up an adequate inventory of wines. Toby Taylor , general manager wants hank to analyzing
the inventory situation and recommend ways in which we can economize

Recommendations:

 The current EOQ model had many flaws

 Setup Cost: The blending and size changeover and label changeover cost were depended
on the fixed annual salaries of the employees which did not affect the production cost,
therefore they were not relevant for the calculation of EOQ
 Ordering processing cost was also based of the salary of two workers and did not
dependent on the number of setups, therefore this was also irrelevant
 Unit Cost: Taxes such as the custom duty and federal rectification tax should have been
included in the unit cost for the calculation of EOQ as the are associated with the
production processes
 Carrying Cost: It was estimated that, they would earn a 20% return on the money
invested in wine merchandising, therefore this should be considered as the carrying cost
instead of the 9%.

Submitted by –Akula Padma Priya, Sec B, PGP12101