Which one of the following is implied by a " lead time " service level of 95 percent?
A)Approximately 95 percent of demand during lead time will be satisfied.
B)The probability is 95 percent that demand during lead time will not exhaust the inventory.
C)The probability is 95 percent that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D)The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time.

Question

Quizplus · Accepted Answer

A lead time service level of 95 percent means that there is a 95 percent probability that demand during the lead time will not exceed the amount on hand at the beginning of the lead time. This is because the service level refers to how much of the demand during lead time can be satisfied from on-hand inventory. Therefore, option D is the correct choice. Options A, B, and C are incorrect because they do not accurately reflect the meaning of lead time service level.

Which One of the Following Is Implied by a