Got asked what would happen to inventory when the number of stocking locations change. I thought for a minute and remembered a quick estimate. The Square Root Law states that total safety stock can be approximated by multiplying the total inventory by the square root of the number of future warehouse locations divided by the current number.
X2 = (X1) * √ (n2/n1)
n1 = number of existing facilities
n2 = number of future facilities
X1 = existing inventory
X2 = future inventory
Here are two examples:
Current inventory is 4000 units, 2 facilities grow to 3. Using the square root law the future inventory = (4000) * √ (3/2) = 4000 * 1.2247 = 4899 units.
Current inventory is 4000 units, 2 facilities grow to 8. Using the square root law the future inventory = (4000) * √ (8/2) = 8000 units.
Related post: Square root law of inventory - application