Which one of the following statements is best?
A) The level of safety stock maintained decreases when the desired cycle-service level increases.
B) The level of safety stock maintained decreases when the standard deviation of demand during lead-time increases.
C) When no safety stock is maintained, stockouts will occur during approximately 50% of the cycles.
D) The level of safety stock maintained is greater if mean absolute deviation (MAD) is used rather than standard deviation in estimating forecast errors.

Question

Quizplus · Accepted Answer

Safety stock is a buffer against variability in demand and lead times. When no safety stock is maintained, the system is vulnerable to any variation, leading to stockouts in approximately 50% of the cycles if demand is normally distributed and the reorder point equals the expected demand.

Which One of the Following Statements Is Best