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Your supply chain consists of one warehouse and N retail locations. Assume that shipment lead time...

Your supply chain consists of one warehouse and N retail locations. Assume that shipment lead time is non-zero, a periodic review system is used, and demand is uncertain. Where should inventory be held?

Question 8 options:

at the retail locations

at the warehouse location

at both the warehouse and retail locations

business   Operations-Management   
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Answer #1

At both the warehouse and retail locations

A periodic system always provides a greater risk of stock out especially when the demand is uncertain. This means that the overall supply chain system will have higher degree of risk due to bullwhip effect. Naturally, the only way to minimize the risk is that we need to make sure safety stocks and inventories are held at each level. This is why inventory should be held at warehouse and the retail locations.

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