Management has carefully measured the standard deviation of the demand of a product and plans to use this to calculate the level of safety stock. If they keep one Standard Deviation of safety stock then
The expected service level should be approximately:
A) 15%
B) 35%
C) 85%
D) 90%
E) 100%

Question

Quizplus · Accepted Answer

Keeping one standard deviation of safety stock corresponds to covering approximately 84% (rounded to 85% for simplicity) of the demand variability, assuming a normal distribution of demand. This means the expected service level, or the probability of not running out of stock, is about 85%.

Management Has Carefully Measured the Standard Deviation of the Demand