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A manufacturer sells a product in two regions. Weekly demand in each region is Normally distributed with mean 1,000 and standard deviation 300.

Lead time is one week. Demand in the two regions has a correlation coefficient of -.35. They are considering two supply chain configurations:

(1) A distribution center in each region, and,

(2) a central distribution center that would serve demand from each region. Suppose they want to maintain a 95% service level (i.e. don't stock out 95% of the time).

a. How much safety stock will there be with one distribution center?

b. How much total safety stock will there be with two distribution centers?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92685869

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