1. A sports-car manufacturing company MLTR currently has warehouse in three locations, i.e., Denver, New York,...

 

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1. A sports-car manufacturing company "MLTR" currently has warehouse in three locations, i.e., Denver, New York, and Boston. The variance of weekly demands of all these cities and absolute value of the correlation co-efficient among these cities are given in Table 1. Also, it is known that demands of Denver and New York, and demands of Denver and Boston are positively correlated. In contrast, demands of New York and Boston are negatively correlated. Now, "MLTR" is considering to build a centralized warehouse in Chicago to reduce safety stock requirement. The replenishment lead time for each of cities is 4 weeks. The Company maintains a customer service level of 0.95. Table 1. Description of the data related to demands and correlation co-efficient Variance of the weekly demand (in weeks)-Denver Variance of the weekly demand (in weeks)-New York Variance of the weekly demand (in weeks)-Boston Correlation between the demands of Denver and New York Correlation between the demands of Denver and Boston Correlation between the demands of New York and Boston 16 25 36 0.7 0.8 0.4 Based on the information given above, answer the following questions (a) What is the safety stock required for each of Denver, New York, and Boston? What is the total safety stock required for the decentralized option? [1+1+1+0.5=3.5] (b) What is the standard deviation of the demand in case of centralized location in New York? What is the total safety stock required for the centralized option? [2+1=3.0] (c) What is the reduction in the safety inventory if MLTR moves from disaggregate to aggregate option? [1] 1. A sports-car manufacturing company "MLTR" currently has warehouse in three locations, i.e., Denver, New York, and Boston. The variance of weekly demands of all these cities and absolute value of the correlation co-efficient among these cities are given in Table 1. Also, it is known that demands of Denver and New York, and demands of Denver and Boston are positively correlated. In contrast, demands of New York and Boston are negatively correlated. Now, "MLTR" is considering to build a centralized warehouse in Chicago to reduce safety stock requirement. The replenishment lead time for each of cities is 4 weeks. The Company maintains a customer service level of 0.95. Table 1. Description of the data related to demands and correlation co-efficient Variance of the weekly demand (in weeks)-Denver Variance of the weekly demand (in weeks)-New York Variance of the weekly demand (in weeks)-Boston Correlation between the demands of Denver and New York Correlation between the demands of Denver and Boston Correlation between the demands of New York and Boston 16 25 36 0.7 0.8 0.4 Based on the information given above, answer the following questions (a) What is the safety stock required for each of Denver, New York, and Boston? What is the total safety stock required for the decentralized option? [1+1+1+0.5=3.5] (b) What is the standard deviation of the demand in case of centralized location in New York? What is the total safety stock required for the centralized option? [2+1=3.0] (c) What is the reduction in the safety inventory if MLTR moves from disaggregate to aggregate option? [1]

Answer rating: 100% (QA)

a To calculate the safety stock required for each city we can use the formula Safety Stock Z Lead Time Variance where Z is the Zscore corresponding to ... View the full answer