Perkins Western Boot Emporium currently owns four warehouses in Houston, Seattle, Minneapolis and San Diego to store its boots before shipping them out to various retail customers across the western and midwestern America. Greg Perkins, the owner, is considering a change to two central warehouse in Salt Lake City and Kansas City to service all of their retail customers, and it curious to know the impact this will have on their system inventory requirements. Their current average inventory level is approximately 5,000 boots at each warehouse. He has found that this level of stock will result in warehouse stockouts approximately one percent of the time. Using the square root rule, what is the new average inventory level needed at each central warehouse (assume each central warehouse has the same inventory level) to maintain the same level of stockouts? What is the reduction percentage for the total system inventory?

Answer rating: 100% (QA)

To maintain the same level of stockouts with two central warehouses instead of four we ca... View the full answer