In such an environment having multiple sources of supply may be better and safe. Creating DC's actually was a move toward backward positioning. Prior to the change, inventory was held at the retail level, the ultimate in forward positioning. Positioning inventory back at field warehouses therefore does enjoy a pooling effect also with a corresponding decrease in inventory. However, this step increases transit time to the retailers and reduces Ethan Allen's capability to react quickly to their needs.
Some balance is needed.
Best ordinary policy is a 1000 unit purchase quantity. Flow Time Dept. Flow Time Dept. Maximum Value of AOQ over possible values of proportion defective is .013. The AOQL is therefore 1.3 percent defective when the lot proportion defective is .02.