Value of Aggregation (Problem 12.12)
Demand per period (weekly) per location, Di =
300
Standard deviation of demand, sD = 300
Ave replenishment lead time, L (weeks)= 3
Standard deviation over L, σL (weeks)= 520
Desired cycle service level, CSL = 0.95
Correlation Coefficient, r= 0.00
Number of retail outlets 25.00
Intermediate Calculation
Without
Aggregation
With
Aggregation
Mean Weekly Demand, DC7500
Standard Deviation of demand, sDC1500
Mean demand during L, DL = 900 22500
SD of demand during L, σL = 520 2598
Resulting Safety Inventory Level at Each Retail Outlet
Estimated safety inventory (units) = 854.69 4,273.46
# of days demand = 2.85 0.57
Total Safety Inventory Required
Total Safety Inventory Required 21,367.28 4,273.46
Change the correlation coefficient in Cell D7 to 0.5 to show the
saving in safety inventory from going online in Cell D23 changes.