In setting the reorder point for an item with variable demand,a service level of 95% will imply which of the following?
A)Stockouts may occur only 5 times during the phase of 100 inventory cycles.
B)Five percent (5%)of the supplier shipments will be late.
C)There is a 0.05 probability that the forecasted demand is not accurate.
D)The forecast demand will be accurate 95% of the time.

Question

Quizplus · Accepted Answer

A service level of 95% means that stockouts are expected to be avoided in 95 out of 100 cases, implying that stockouts may occur 5 times during 100 inventory cycles.

In Setting the Reorder Point for an Item with Variable