When is a model such as the economic lot sizing model

5. When is a model such as the economic lot sizing model, which ignores randomness,
useful?
6. What are the penalties of facing highly variable demand? Are there any advantages?

7. Give a specific example of risk pooling (a) across locations, (b) across time, and (c)
across products.
8. When would you expect demand for a product in two stores to be positively correlated?
When would you expect it to be negatively correlated?
9. Consider a supply chain consisting of a single manufacturing facility, a cross dock, and
two retail outlets. Items are shipped from the manufacturing facility to the cross-dock
facility and from there to the retail outlets. Let ? 1 be the lead time from the factory to the
cross-dock facility and ? 2 be the lead time from the crossdock facility to each retail outlet.
Let ? = ? 1 + ? 2. In the analysis below, we fix ? and vary ? 1 and
a. Compare the amount of safety stock in two systems, one in which lead time from the
cross-dock facility to a retail outlet is zero (i.e., ? 1 = ? Land
? 2.
).