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Module 2 · Lab · Simulated · Passive Infra
Module 2 · Inventory management

Lab: central warehouse or regional stores? Risk pooling

The same demand, held in four regional stores or in one central warehouse. Work out the safety stock both ways, see why pooling cuts it, then count the cost of the extra delivery leg and decide where the stock should live. Allow about 20 minutes.

1

Pick an item and a network

Same items as the other Module 2 labs

Data card

2

Demand by regional store

Use these numbers for the tasks

Each store's weekly standard deviation is the item's total weekly standard deviation times the square root of the store's share of demand, so that independent stores add up to the national figure. Small stores are relatively more erratic. Stores are independent when the correlation is 0.

3

Your tasks

Answers are checked against the settings above
4

The pictures

Each unlocks as you finish its tasks

Safety stock: four regional stores or one warehouse

The square root law: safety stock as stores multiply

The trade-off: holding saving against extra freight

5

Your recommendation

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