Question: Warehouse 1 Warehouse 2 286 149 0.1 95% Std. deviation of lead time demand Correlation of lead time demands In-stock rate (alpha) Std. normal variate

Warehouse 1 Warehouse 2 286 149 0.1 95% Std.

Warehouse 1 Warehouse 2 286 149 0.1 95% Std. deviation of lead time demand Correlation of lead time demands In-stock rate (alpha) Std. normal variate (z) Safety stock Combined safety stock (WH1, WH2) Pooled std. deviation of lead time demand Pooled safety stock (after centralization) Portfolio effect 1. What is the safety stock requirement in Warehouse 1? 2. What is the safety stock requirement in Warehouse 2? 3. What is the total safety stock requirement before centralization? 4. What is the pooled standard deviation of lead time demand? 5. What will be the safety stock requirement *after* centralization 6. What is the portfolio effect in this case? Warehouse 1 Warehouse 2 286 149 0.1 95% Std. deviation of lead time demand Correlation of lead time demands In-stock rate (alpha) Std. normal variate (z) Safety stock Combined safety stock (WH1, WH2) Pooled std. deviation of lead time demand Pooled safety stock (after centralization) Portfolio effect 1. What is the safety stock requirement in Warehouse 1? 2. What is the safety stock requirement in Warehouse 2? 3. What is the total safety stock requirement before centralization? 4. What is the pooled standard deviation of lead time demand? 5. What will be the safety stock requirement *after* centralization 6. What is the portfolio effect in this case

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