Croma is an Indian retail chain for consumer electronics. The company currently has 25 stores located in major metropolitan areas. Weekly demand for smartphones at each store is normally distributed, with a mean of 300 and a standard deviation of 300. The supplier currently takes four weeks to fulfill a replenishment order, which is placed separately by each store. Croma is targeting a CSL of 95 percent and monitors its inventory continuously. a. How much safety inventory of smartphones should Croma carry at each retail store? Croma is considering moving smartphones to the online channel, where they would be stocked in a single national warehouse. Assume that Croma can move smartphones to the online channel without losing demand (the online demand is a sum of demand at each retail store). b. How much saving in safety inventory can Croma expect from going online if demand across stores is independent? How much saving in safety inventory can Croma expect from going online if demand across stores has a correlation coefficient of p = 0.5?
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