ABC Tools has divided its northeast U.S. market into three customer regions. The weekly demands at the regions are normally distributed with mean and standard deviation as shown in Table 5.18. Assume that the regional demands are independent. Currently, the company has three dedicated DCs, one for each demand region and maintains an 80% service level to its customers. The company is studying a new option to have just one central DC to serve all three demand regions.
Given the replenishment lead time from the plant to any DC is 1 week, answer the following questions:
(a) Determine the current level of safety stock in the supply chain under the present (three DC) system.
(b) Compute the new level of safety stock in the supply chain under the new option (one central DC), if the company continues to maintain 80% service level to its customers.
(c) Suppose the company wants to maintain the current level of safety stock found in part (a) for the new (one DC) option also. What will be the new Service Level to its customers in that case?