Q6

Demand aggregation Koffeesrus sells decaffeinated (decaf) coffees separately in east and west markets from two distribution centers (East-DC and West-DC).

Mean and standard deviation of weekly demand and lead time at each DC are summarized in Table 6.

Koffeesrus uses continuous-review policy.

Koffeesrus targets CSL of 95%.

Demands at the distribution centers are independent.

	East-DC	West-DC
Mean of demand (units per week)	D = 10	D = 20
Standard deviation of demand (units per week)	D = 3	D = 4
Lead time for replenishment (weeks)	L = 4	L = 4
Cycle service level (CSL)	CSL = 0.95	CSL = 0.95

(6-1) Koffeesrus decides to aggregate demands by serving both east and west markets for the decaf coffees from a central distribution center (CDC). What are the weekly demand and the standard deviation of weekly demand at CDC?

	Answer
Weekly demand at CDC	units
Standard deviation of weekly demand at CDC	units

(6-2) What is the safety inventory of the decaf coffees at CDC with the same lead time and CSL (L=4 and CSL=0.95)?

	Answer
Safety inventory of decaf coffee at CDC	units