Manufacturer RFC is re-evaluating its supply chain design. Its current supply chain is a four-echelon supply chain:
RFC, wholesaler ,distributor, retailer. Suppose that the average weekly demand faced by the retailer is 45, with a standard deviation of 32.
Also suppose that at each echelon, the management wishes to maintain a service level of 97% (z=1.88), and the lead time between each of the echelon is one week.
In other words, it takes the retailer one week to receive replenishment from the distributor; it also takes one week for the distributor to receive replenishment from the wholesaler.
Likewise, the lead time between RFC and its supplier is also one week.
(a) Given the current supply chain design, what is the reorder point for the retailer?
(b) Given the current supply chain design, what is the reorder point for RFC?
(c) Compared between the answers from (a) and (b), list two key takeaways you observe.