Question: A flower distributor is interested in pooling its distribution centers that currently service two separate markets. Suppose each market has an average demand of 500

A flower distributor is interested in pooling its distribution centers that currently service two separate markets. Suppose each market has an average demand of 500 units and a standard deviation of demand for 100 units. Also assume the market demands are independent of each other. Assume that regardless of the option, the company wants to achieve a 95% service level.

Option 1: keep the distributions centers separate. Each distribution center will serve one market.

Option 2: combine the distribution centers to serve the two separate markets.

A) How much inventory would you purchase with option 1?

B) How much inventory would you purchase with option 2?

C) Which of the options would be most cost effective?

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