Problem
Suppose that Boundaries Bookstore sells books in traditional bricks-and-mortar outlets, while Jungle.com sells books over the Internet. Hence, Boundaries holds separate stocks of a given book in each store, while Jungle.com holds all its inventory in a central warehouse. Both firms use a continuous review inventory policy in which the reorder point is the sum of average demand during lead time plus safety stock. a. Suppose that Boundaries has 100 outlets, and the desired service level corresponds to a safety factor of z = 2. If a particular book sells an average of 10 copies per month at each store, with a standard deviation of 3, how much safety stock will the firm carry across all its outlets? b. Suppose that Jungle.com sells the same number of books (i.e., 1000 copies) as Boundaries. Further, suppose that its demand process behaves like the sum of the demand at the 100 Boundaries stores (assume demand at each store is independent). With a safety factor of z = 2, the same as Boundaries', how much safety stock will the firm carry?