Reference no: EM132155977

In Supply Chain Management, inventory productivity represents a major area of focus. Managing inventory information and deliveries are a major operational challenge for firms as they try simultaneously to reduce costs and improve customer service. To put it in perspective, according to the US Census, inventory investment in the U.S. for all retailers amounts to $551 billion dollars while sales are $389 billion dollars for June 2014. Previous research has estimated inventory investment to represent 36% of total assets and 53% current assets (Gaur et al. 2005). During this semester, we discussed several techniques geared towards the effective and efficient management of inventory. The Square Root Law being the most recent one.

Part 1: Describe and discuss the function of the Square-Root Law.

Part 2: A major retailer, S&S, is planning to expand their operations in the South-East Region. As part of their strategic plan they are interested in opening one or two more additional distribution centers; however, they are unsure as to how much additional inventory they would need to carry. You have been hired to help determine the inventory impact of adding one or two additional distribution centers. Use the Square-Root Law for this analysis. (Show your work)

S&S provided you with the following information:

Current number of distribution centers = 3

Each distribution center is equal in size

Each distribution center carry a total of 15,000 units