A manufacturer sells a product in two regions. Weekly demand in each region is Normally distributed with mean 1,000 and standard deviation 300. Lead time is one week.
Demand in the two regions has a correlation coefficient of -.35.
They are considering two supply chain configurations:
(1) A distribution center in each region, and,
(2) a central distribution center that would serve demand from each region.
Suppose they want to maintain a 95% service level (i.e. don't stock out 95% of the time).