When both the demand and lead time of a product are variable, firms must keep a higher safety stock level compared to variations in just demand, to offer the same service level.

Question

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When both demand and lead time are variable, there is more uncertainty in the supply chain, making it difficult for firms to accurately forecast demand and plan inventory levels. As a result, firms typically keep a higher safety stock level to ensure that they can meet customer demand and maintain a desired service level.

When Both the Demand and Lead Time of a Product