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3. Microsoft manufacturers its hardware products (mice, keyboards, XBOX video game consoles, etc.) at what it calls Manufacturing Turnkey Vendors (MTVs) in Asia. The MTVs
3. Microsoft manufacturers its hardware products (mice, keyboards, XBOX video game consoles, etc.) at what it calls "Manufacturing Turnkey Vendors" (MTVs) in Asia. The MTVs ship finished product to "Distribution Turnkey Vendors" (DTVs) every week with a lead time of about four weeks. There are four DTVs worldwide, one for each of the following regions: North America, Central/South America, Europe, and Asia. The DTVs hold safety stock and handle sales for all products in their region. Microsoft is considering consolidating two DTVs into one. It's not sure it needs a separate DTV for the Central/South American region and wants to determine the inventory impact of servicing that region out of its North American DTV. Suppose the demand for a certain model of webcam in Central/South America has a mean of 120 units per week and a standard deviation of 75 units per week. Demand for the same webcam in North America has a mean of 450 units per week and a standard deviation of 190 units per week. a. What is the coefficient of variation of demand for the webcam in Central/South America? How about North America? b. If Microsoft decides to serve both regions out of its North American DTV, what would the coefficient of variation of demand for the webcam be there? c. If Microsoft has a 98% service level target, by what percentage would they reduce their total safety stock for the Americas by servicing North, Central and South America out of a single DTV? Is this reduction larger or smaller than what you'd expect if both regions had identically distributed demand
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