Return to the Epson data in Exercise 15. Assume that demand in different countries is not independent. Demand in any pair of countries is correlated with a correlation coefficient of ρ. Evaluate the holding cost savings that Epson gains as a result of building a European DC as ρ increases from 0 (independent demand) to 1 (perfectly positively correlated demand) in intervals of 0.2.

Data From Exercise 15

Epson produces printers in its Taiwan factory for sale in Europe. Printers sold in different countries differ in terms of the power outlet as well as the language of the manuals. Currently, Epson assembles and packs printers for sale in individual countries. The distribution of weekly demand in different countries is normally distributed, with means and standard deviations as shown in Table 12-6.

Assume demand in different countries to be independent. Given that the lead time from the Taiwan factory is eight weeks, how much safety inventory does Epson require in Europe if it targets a CSL of 95 percent?

Epson decides to build a central DC in Europe. It will ship base printers (without power supply) to the DC. When an order is received, the DC will assemble power supplies, add manuals, and ship the printers to the appropriate country. The base printers are still to be manufactured in Taiwan with a lead time of eight weeks. How much saving of safety inventory can Epson expect as a result?

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TABLE 12-6 Weekly Demand for Epson Printers in Europe Country Mean Demand Standard Deviation France 3,000 2,000 Germany 4,000 2,200 Spain -bom 2,000 1,400 Italy 2,500 1,600 Portugal 1,000 800 UK 4,000 2,400