Cooper, a recent graduate of OHU, has launched a new brand of potato chips that has taken the Midwest by storm. After starting from operations in just Michigan, Justin’s potato chips are now being sold in Ohio and Illinois as well. Currently inventory is held at 3PL warehouses in each state, from where it is sent to retail stores in that state. Thus there are three warehouses being used to satisfy demand in the 3 states mentioned above.
Bob recently paid a lot of money to attend a supply chain management conference where he learned about the benefits of risk pooling. Risk pooling is the idea that combining inventory for different geographic regions can often reduce the total inventory requirement and hence save costs. He is considering combining the inventory of any 2 out of the 3 states, into one warehouse.
The current system has a total of 4,979 boxes of inventory on average. There are 3 warehouses, and Justin is considering moving to a new system with only 2 warehouses, what will be the total inventory in the new system? (Hint: Use the square root law). Enter your answer to 2 decimal places.
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