a company distribution network has eight regional warehouses

a company distribution network has eight regional warehouses for the US market.The total demand is equally distributed among the eigth warehouses.suppose the company decides to close three warehouses and assign their demands equally to the remaining five warehouses.

a)what will be impact of this risk pooling strategy on the total inventory carried in the supply chaim?

b)what are the negative impacts of this risk pooling strategy?

Solution

A) The total inventory will have to be managed by the remaining five warehouses and space constraint issues might arise which means the soace available might not be sufficient for all yhe material of all the eight in just five. Distance also might be a problem for transportation of the material. Hence there will be a huge impact on the inventory management due to space availability.

B) This step also needs the remaining warehouses to distribute the work of the closed ones which increases the burden on the employees and hence quality issues might arise. The time availability will be less and the work that needs to be done will be more. Hence the balance will be lost. This created dissatisfaction among workers. Even customers might be effected .