Crew Soccer Shoes Company is reconsidering its current inventory control system and distribution strategy for soccer shoes. The information regarding the shoes is as follows: Annual Demand = 1000 pairs/year Lead time = 1 week Order cost = $35/order Holding cost = $2.00/pair/year Service Level = 95% Standard deviation of annual demand = 1000 Number of weeks/year = 50
1. If Crew currently has one warehouse and serves both the East and West Coast demand (which are equal and they assume normally distributed and independent), what will happen to demand, total inventory and safety stock if they open a second warehouse? Try to answer in words, then with math. Assume they use a fixed quantity Q, R system and each warehouse will serve one Coast.