Because of uncertainty of demand, a firm may choose to hold an additional amount of inventory called:
A) re-order stock.
B) transit stock.
C) safety stock.
D) economic order quantity stock.

Question

Quizplus · Accepted Answer

Safety stock serves as a buffer against unexpected changes in demand or supply chain disruptions. Holding safety stock ensures that the firm can continue to meet customer demand even if unexpected events occur. Re-order stock refers to the quantity of inventory ordered when a replenishment order is placed. Transit stock represents inventory being transported between locations. Economic order quantity stock refers to the optimal quantity of inventory to order based on balancing inventory holding costs and order costs.

Because of Uncertainty of Demand, a Firm May Choose to Hold