It has become very popular for many large businesses to consolidate their tradit

Question

It has become very popular for many large businesses to consolidate their traditionally large number of field warehouses or stocking points in the market. Johnson and Johnson is considering reducing its existing 16 warehouses carrying its diabetes care line of products into 4 regional distribution centers. Currently in these 16 warehouses, J&J; is carrying a total of about 32000 units of safety stock to deal with all kinds of uncertainties. If the consolidation is implemented, by applying the Square Root Law how many units of safety stock would be needed approximately? O a. 8000 units b. 16000 units O c. 20000 units O d. 24000 units o e. 32000 units

Explanation / Answer

Number of existing facilities(N1) = 16

Number of future facilities(N2) = 4

Current safety stock (X1) = 32000 units

So safety stock needed = X1(sqrt of N2/N1)

= 32000(sqrt of 4/16)

= 32000(sqrt of 0.25)

= 32000 x 0.5

= 16000 units

So the answer is option b

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