![]() ![]() The result of the research was a white paper that we recently released. It does not cover the impact of lead time variability or even replenishment frequency. This rule-of-thumb only covers safety stock and not cycle stock.Īnd, this rule-of-thumb is only meant for the safety stock you hold because of demand variability. ![]() This idea comes from a rule-of-thumb called the “square root of N rule.” This rule states that the system-wide total safety stock is directly related to the square root of the number of warehouses. Mostly, firms are worried that it they increase the number of warehouses they will lose any transportation savings with extra inventory costs. This is a question that comes up quite a bit when doing network design studies. I had the opportunity to work with a team of students at Georgia Tech exploring the relationship between the number of warehouse and inventory.
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