Understanding Safety Stock Levels

Under what circumstances would a company hold a large amount of safety stock?

• When demand is highly predictable

• When demand is highly unpredictable

• When lead times are short

• When supply chain is stable

What is safety stock?

• Inventory held to meet expected demand

• Inventory held to prevent stockouts due to uncertainties

• Inventory held for promotional purposes

• Inventory held for seasonal sales

When would a company hold a small amount of safety stock?

• When demand is highly unpredictable

• When lead times are long

• When demand is stable and predictable

• When supply chain disruptions are frequent

Under what condition would a company hold zero safety stock?

• When there is no variability in demand or supply

• When demand is highly unpredictable

• When lead times are long

• When supply chain is unstable

What factor would most likely lead to an increase in safety stock levels?

• Decrease in demand variability

• Increase in lead time variability

• Stable supply chain

• Predictable demand

Which of the following is a reason for holding safety stock?

• To increase production efficiency

• To buffer against demand and supply uncertainties

• To reduce storage costs

• To enhance product quality

How does a stable supply chain affect safety stock levels?

• Increases safety stock

• Decreases safety stock

• Has no effect on safety stock

• Doubles the safety stock

What is the primary purpose of safety stock?

• To increase sales

• To prevent stockouts

• To reduce lead times

• To enhance customer service

Which scenario would likely result in zero safety stock?

• High demand variability

• Long lead times

• Perfectly synchronized supply and demand

• Frequent supply chain disruptions

What happens to safety stock levels if demand becomes more predictable?

• Safety stock levels increase

• Safety stock levels decrease

• Safety stock levels remain the same

• Safety stock levels double