The higher the average cost of a stockout,the more likely a company is going to want to hold some amount of inventory (safety stock)to protect against stockouts.

Question

Quizplus · Accepted Answer

This statement is true. A higher cost of stockout means that the company is losing more money due to stockouts, and hence, they would want to take measures to prevent it. Holding some amount of inventory in the form of safety stock can help in preventing stockouts and provide a cushion for unexpected demand spikes.

The Higher the Average Cost of a Stockout,the More Likely