SCM $404-001$&$002$

Assignment $5(3$ points$)$

$1.$ A company serves two markets in North America and must decide on the optimal order

quantity and safety stock. The demand in the first market can be $1,2,3,$ or $4$ with equal

probability, while the demand in the second market can be $3,4,$ or $5$ also with equal probability.

The company has a target cycle service level of $90\%($CSL$=90\%)$ in both markets. $(0\mathrm{.}25$ points each$)$

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 the optimal order quantity and safety stock for the decentralized

distribution system?

d$.$ What are the optimal order quantity and safety stock for the centralized distribution

system?

$2.$ In a distribution network with $3$ DCs$,$ the addition of $2$ more DCs causes the total safety

stock to increase by: $($assume that demand at each DC is identically distributed and

independent of each other$)(1$ points$)$

$3.$ In a distribution network with $5$ DCs$,$ the reduction of $2$ DCs causes the total safety

stock to decrease by: $($assume that demand at each DC is identically distributed and

independent of each other$)(1$ points$)$