A company serves two markets in North America and has to decide on optimal order quantity and safety stock. The demand in the first market is equal to 1, 2, 3, or 4 with equal probability, whereas the demand in the second market is equal to 3, 4, or 5 with equal probability. The company has a target level of product availability of CSL=90% on both markets.

a) What is the optimal order quantity for market 1? What is the optimal safety stock for market 1?

b) What is the optimal order quantity for market 2? What is the optimal safety stock for market 2?

c) What are optimal order quantity and safety stock for the decentralized distribution system?

d) What are optimal order quantity and safety stock for the centralized distribution system?

Answer rating: 100% (QA)

a Demand Probability Cumulative probability 1 025 025 09 2 025 050 09 3 025 075 09 4 025 100 09 So f... View the full answer