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Magazine Luiza is a Brazilian retail chain for consumer electronics. The company currently has 100 stores distributed across Brazil. It also operates an online channel.

Magazine Luiza is a Brazilian retail chain for consumer electronics. The company currently has 100 stores distributed across Brazil. It also operates an online channel. It is considering introduction of a new printer and must decide whether to offer it at retail store or the online channel. Weekly demand for the printer at each store has been forecast to be normally distributed with a man of 100 and a standard deviation of 80. The company has also forecast that the demand at the online channel would be the sum of demand across all 122 stores. The supplier will take four weeks to fulfill a replenishment order, whether placed separately by each store or by the online DC. Magazine Luiza is targeting a CSL of 95% and monitors its inventory on a continuous basis.

  1. How much safety inventory will the firm carry if the printer is carried at all 100 stores?
  2. How much safety inventory will the firm carry if the printer is carried online only and demand across stores is independent?
  3. How much safety inventory will the firm carry if the printer is carried online only and demand across stores has a correlation coefficient of r= 0.3?

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