The GAP has 3 retail stores serving ankaya-Ankara. Weekly demand data for each retail store is...

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The GAP has 3 retail stores serving Çankaya-Ankara. Weekly demand data for each retail store is given in the table below. The lead time from the supplier is 3 weeks. Each retail store covers a separate neighborhood and the correlation between demand across any pair neighborhood is p. The dealership of Turkey is considering the possibility of aggregating those 3 stores. Assume that the demand in the central store is the sum of demand across all 3 stores. The dealership is targeting service level of 95%. Store Kentpark Panora Gordion Mean demand 450 600 375 Std. Deviation 10 10 10 Compare the level of safety inventory needed under the two option when a) (8 pts) Demand in each area is independent b) (10 pts) p=0.4 c) (5 pts) p=0.8 d) (3 pts) What is the effect of correlation on the cost saving achieved by aggregation? e) (4 pts) What are the two major disadvantages of aggregating all inventories in one location? The GAP has 3 retail stores serving Çankaya-Ankara. Weekly demand data for each retail store is given in the table below. The lead time from the supplier is 3 weeks. Each retail store covers a separate neighborhood and the correlation between demand across any pair neighborhood is p. The dealership of Turkey is considering the possibility of aggregating those 3 stores. Assume that the demand in the central store is the sum of demand across all 3 stores. The dealership is targeting service level of 95%. Store Kentpark Panora Gordion Mean demand 450 600 375 Std. Deviation 10 10 10 Compare the level of safety inventory needed under the two option when a) (8 pts) Demand in each area is independent b) (10 pts) p=0.4 c) (5 pts) p=0.8 d) (3 pts) What is the effect of correlation on the cost saving achieved by aggregation? e) (4 pts) What are the two major disadvantages of aggregating all inventories in one location?

Answer rating: 100% (QA)

SOLUTION a When demand in each area is independent we can calculate the safety stock for each store using the following formula Safety stock Zscore x Standard deviation of lead time demand where Zscor... View the full answer