In a fixed-order-quantity system, when demand is uncertain, using economic order quantity (EOQ) based only on the average demand will result in a low probability of a stockout.

Question

Quizplus · Accepted Answer

EOQ assumes that demand is constant, known and certain. When demand is uncertain, using EOQ based only on average demand will result in a higher likelihood of stockouts as inventory levels may not be sufficient to meet peak demand. Consideration of safety stock is needed to manage this uncertainty and reduce the risk of stockouts.

In a Fixed-Order-Quantity System, When Demand Is Uncertain, Using Economic