By incorporating the demand uncertainty into EOQ model, the concept of service level is introduced.Service level is associated with how much safety stock to be carried.There are two types of service levels.___________ uses the probability of stocking out as a measure while _____________ uses expected number of units short per reorder cycle.Choose the correct words to fill in the blanks.

Question

Quizplus · Accepted Answer

Cycle service level is the probability of not running out of stock during the lead time. Customer service level is the probability of meeting the customer demand during the lead time. In the context of incorporating demand uncertainty into EOQ model, the relevant measure is cycle service level, which is relevant for determining the safety stock. Therefore, the first blank should be cycle service level. The second blank should be customer service levels, as it measures the level of customer satisfaction in terms of the expected number of units short per reorder cycle. Thus, the correct answer is A.

By Incorporating the Demand Uncertainty into EOQ Model, the Concept