Asked by Michelle McDade on Jun 10, 2024
Verified
In case demand in different geographical regions is about the same size and independent,aggregation increases safety inventory by the square root of the number of areas aggregated.
Geographical Regions
Refers to specific areas or divisions of the world categorized by physical form, climate, political division, or economic condition.
Aggregation
The process of combining multiple pieces of data, inventory, or information into a single group or total, often for analysis or planning purposes.
Safety Inventory
Additional stock kept in reserve to protect against uncertainties in demand or supply, ensuring product availability.
- Uncover the elements that affect the adequate level of buffer stock and perceive the trade-offs that come with it.
Verified Answer
CD
Camryn DavisJun 14, 2024
Final Answer :
False
Explanation :
Aggregation in this context typically reduces the overall safety inventory required, as it leverages the risk pooling effect, which suggests that variability in demand across different areas tends to cancel out, thus reducing the total safety inventory needed rather than increasing it.
Learning Objectives
- Uncover the elements that affect the adequate level of buffer stock and perceive the trade-offs that come with it.