Question

As a general rule, how much more safety stock will be needed to meet the smaller demand target if we increase the number of warehouses from 1 to 2?

a. 100%
b. 50%
c. 40%
d. 20%
e. 10%.

Answer 1

The safety stock needed to meet a smaller demand target decreases as the number of warehouses increases. This is because having multiple warehouses helps distribute the risk and variability associated with demand.

The correct answer would be:
e. 10%.

Answer 2

Increasing the number of warehouses from 1 to 2 may not require more safety stock for meeting smaller demand targets.

Step-by-step explanation:

Increasing the number of warehouses from 1 to 2 does not necessarily require more safety stock to meet the smaller demand target. In fact, it may even reduce the need for safety stock as the availability of two warehouses can help distribute the products more efficiently. The percentage change in the safety stock required will depend on various factors such as the demand variability, lead time, and service level targets.