Suppose your company decides to create a more "service-oriented" distribution network by doubling the number of independently operated stores located around the country.Assuming demands are spread equally across the stores and inventory policies continue to be optimized,how much would you expect total cycle and safety stocks to increase? (Pick the nearest answer.)
A)250 percent
B)100 percent
C)40 percent
D)25 percent

Question

Quizplus · Accepted Answer

Doubling the number of stores while keeping demand equal across them will increase cycle and safety stocks due to reduced risk pooling benefits. The increase is typically around 40% due to the square root law of inventory management.

Suppose Your Company Decides to Create a More "Service-Oriented" Distribution