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Under what circumstances would the amount of safety stock held be a. Large b. Small c. Zero Answer

Ans:

Large

For a given order cycle service level, the greater the variability in either demand rate or lead time, the greater would be the amount of safety stock that will be needed to achieve that service level. Similarly, for a given amount of variation in demand rate or lead time, achieving an increase in the service level will require increasing the amount of safety stock.

 Small

Ans: When there is less variability in the demand rate or lead time or if there is a decrease in the service level, then it may be required to carry less safety stock.

Zero?

Ans: Zero safety stock would be when company wants to phase out an item or if it is being superseded or the finished good is no longer being manufactured. Also, if the company is following JIT manufacturing, it can carry zero safety stock.

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