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).

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section10.5: Introduction To @risk
Problem 19P: In Problem 12 of the previous section, suppose that the demand for cars is normally distributed with...
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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).

How much more/less safety stock will there be in the configuration with a single distribution center?

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Cengage,