Question
The DoorRed pharmacy has 25 retail outlets in the Chicago region. The current policy is to carry every drug in each retail outlet. The replenishment
The DoorRed pharmacy has 25 retail outlets in the Chicago region. The current policy is to carry every drug in each retail outlet. The replenishment lead time is 10 days. DoorRed aims for a cycle service level of 95%. Consider a drug with daily demand that is normally distributed with mean of 200 and standard deviation of 50. (a) What is the total safety stock across all retail stores? (b) If the drug were centralized in one location, what would the safety stock at the central location be? (c) The drug costs $10 per unit and DoorRed uses an annual inventory holding cost of 20%. What would be the savings in holding safety stock by using one location?
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