LM.51 A large domestic appliance manufacturer is looking for ways to cut down on

Question

LM.51 A large domestic appliance manufacturer is looking for ways to cut down on inventory costs while maintaining their customer service level. They currently hold 68,000 units of spare parts inventory across 28 small regional warehouses throughout the country. They are now looking at pooling the inventory into 4 large warehouses and closing down the smaller warehouses.

If they close the regional warehouses, how many units of inventory would they need to carry across the larger warehouses without increasing the risk of stocking out? (Display your answer as a whole number.)

By what percentage would their inventory decrease by consolidating their inventory from the regional warehouses into the large warehouses? (Write your answer as a percentage and display your answer as a whole number.)

Explanation / Answer

X2 = (X1) * Sqrt(n2/n1)

So X2= 68000 * Sqrt (1/7)

X2= 25701.58

=25702

B.

Total inventory=

Increase =

So the percentage increase is 51%

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