Question: Currently, there are three distribution centers serving the three regions. A periodic review approach is used with a review period of 4 weeks and a

Currently, there are three distribution centers serving the three regions. A periodic review approach is used with a review period of

4

weeks and a lead time of

2

weeks. Annual holding cost is

18 %

of the product cost

-

197 .

The desired service level is

98 % .

If a central distribution center is built, it is very likely that transportation costs will increase. What would be the amount of increase in transportation before centralization is ruled out as an option?

Currently, there are three distribution centers serving the three regions. A

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