If a firm reduces the number of warehouses from two to one and finds that total safety stock levels have not decreased as a result of this warehouse centralization, the most likely explanation is that lead time demands between the two warehouses were perfectly negatively correlated.

True or False?

Question

Anthony Leblanc

Business

30 October, 17:11

If a firm reduces the number of warehouses from two to one and finds that total safety stock levels have not decreased as a result of this warehouse centralization, the most likely explanation is that lead time demands between the two warehouses were perfectly negatively correlated.

True or False?

+3

Answers (1)

Know the Answer?

Nathanial Patrick · Answer 1

The correct option is False.

Explanation:

The safety stock levels are not decreased before and after the centralization, only when the lead time demands between the two warehouses were perfectly positively correlated. i. e the demand in both the warehouses was increasing and decreasing at the same time.

As the correlation indicated in the question statement is regarding the negatively correlated thus the statement is false.

If a firm reduces the number of warehouses from two to one and finds that total safety stock levels have not decreased as a result of this warehouse centralization, the most likely explanation is that lead time demands between the two warehouses were perfectly negatively correlated.True or False?

If a firm reduces the number of warehouses from two to one and finds that total safety stock levels have not decreased as a result of this warehouse centralization, the most likely explanation is that lead time demands between the two warehouses were perfectly negatively correlated.

True or False?