The purpose of safety stock is to:
A) replace failed units with good ones.
B) eliminate the possibility of a stockout.
C) eliminate the likelihood of a stockout due to erroneous inventory tally.
D) control the likelihood of a stockout due to variable demand and/or lead time.
E) protect the firm from a sudden decrease in demand.

Question

Quizplus · Accepted Answer

Safety stock is meant to control the likelihood of a stockout due to variable demand and/or lead time. It serves as a buffer to ensure that demand can still be met even during unexpected circumstances such as sudden spikes in demand or delayed delivery times. The other options, such as replacing failed units or protecting against sudden decreases in demand, are not the primary purpose of safety stock.

The Purpose of Safety Stock Is To