The optimal size of the safety stock is defined by the point where the
A)costs of carrying the safety stock equal stockout costs.
B)setup costs equal stockout costs.
C)ordering costs equal stockout costs.
D)reorder point equals safety stock.

Question

Quizplus · Accepted Answer

The optimal size of the safety stock is defined by the point where the costs of carrying the safety stock equal stockout costs. At this point, the benefits of having an adequate safety stock to minimize stockouts are balanced against the costs of carrying the additional inventory. This approach helps to ensure that the organization maintains a reliable supply chain while avoiding the added expense of carrying excess inventory.

The Optimal Size of the Safety Stock Is Defined by the Point