Value of Aggregation (Problem 12.13)
Demand per period (weekly) per location, Di =
100
Standard deviation of demand, sD = 80
Ave replenishment lead time, L (weeks)= 4
Standard deviation over L, σL (weeks)= 160
Desired cycle service level, CSL = 0.95
Correlation Coefficient, r= 0.00
Number of retail outlets 100.00
Intermediate Calculation
Without
Aggregation
With
Aggregation
Mean Weekly Demand, DC10000
Standard Deviation of demand, sDC800
Mean demand during L, DL = 400 40000
SD of demand during L, σL = 160 1600
Resulting Safety Inventory Level at Each Retail Outlet
Estimated safety inventory (units) = 263.18 2,631.77
# of days demand = 2.63 0.26
Total Safety Inventory Required
Total Safety Inventory Required 26,317.66 2,631.77
Change the correlation coefficient in Cell D7 to 0.3 to show the
saving in safety inventory from going online in Cell D23 changes.