Johnson Manufacturing has decided to consolidate its warehouses and reduce the number of locations from 12 to four.However,Johnson desires to maintain the same service level in terms of the risks of running out of stock in attempting to meet customer demand.As a result,Johnson can expect that:

Question

Quizplus · Accepted Answer

When consolidating warehouses, the square root law of inventory suggests that the required safety stock will decrease. Reducing the number of locations from 12 to 4 implies a reduction factor of √(4/12), which is approximately 0.577, indicating a 42.3% decrease in safety stock, or a 57.7% decline, aligning with option D.

Johnson Manufacturing Has Decided to Consolidate Its Warehouses and Reduce