Restoration Hardware sells antique-design hardware and fixtures from 94 retail stores in malls around the country. Each store currently orders and holds its own inventory directly from approved suppliers. The company is thinking of opening up one or more distribution centers to stock inventory and ship directly to stores on a fast as-needed basis, which could dramatically reduce safety stock and cycle stock on each store.
Use the square-root law (SRL) to estimate the reduction in inventory that 1, 2, or 4 distribution centers would bring for Restoration Hardware.
1 Distribution Center Cost Saving in %
2 Distribution Centers Cost Saving in %
4 Distribution Centers Cost Saving in %
Discussion. Discuss the pros and cons of 1, 2, or 4 DCs, and of no DC at all.
Pros of 1, 2, or 4 DCs:
Cons of 1, 2, or 4 DCs: