Which one of the following is implied by a lead time service level of 95 percent?
A) Approximately 95 percent of demand during lead time will be satisfied.
B) Approximately 95 percent of inventory will be used during lead time.
C) The probability is .95 that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D) The probability is .95 that demand during lead time will not exceed the amount on hand at the beginning of lead timE.
E) The probability is .95 that the order will arrive after the on-hand inventory is exhausted.

Question

Quizplus · Accepted Answer

A lead time service level of 95 percent implies that there is a probability of .95 that demand during lead time will not exceed the amount on hand at the beginning of lead time. This means that the inventory level will be sufficient to satisfy customer demand during lead time in 95 percent of cases.

Which One of the Following Is Implied by a Lead