Assuming that the total customer demand remains the same, the square$-$root rule helps determine the extent to which inventory needs might change as an organization increases or decreases its number of stocking locations.

Consider an organization that currently distributes $150,000$ units of product to its customers from a total of $15$ facilities located throughout the United States. The organization is evaluating an opportunity to consolidate its operations into $5$ facilities. Using the square$-$root rule, calculate the total number of inventory units required with the change in the number of stocking locations. Square$-$Root Rule Formula

X$2=($X$1)$n$2/$n$1$

n$1=$ Number of existing facilities

n$2=$ Number of future facilities

X$1=$ Total inventory in existing facilities

X$2=$ Total inventory in future facilitiesAssuming that the total customer demand remains the same,

the square$-$root rule helps determine the extent to which

inventory needs might change as an organization increases or

decreases its number of stocking locations.

Consider an organization that currently distributes $150,000$ units of product to its

customers from a total of $15$ facilities located throughout the United States. The

organization is evaluating an opportunity to consolidate its operations into $5$

facilities. Using the square$-$root rule, calculate the total number of inventory units

required with the change in the number of stocking locations.

Square$-$Root Rule Formula

$x_2=(x_1)V\frac{n_2}{n_1}$

$n_1=$ Number $of$ existing facilities

$n_2=$ Number $of$ future facilities

$x_1=$ Total inventory $in$ existing facilities

$x_2=$ Total inventory $in$ future facilities