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)Approximately 95 percent of inventory will be used during lead time.
C)The probability is 0.95 that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D)The probability is 0.95 that demand during lead time will not exceed the amount on hand at the beginning of lead time.
E)The probability is 0.95 that the order will arrive after the on-hand inventory is exhausted.

Question

Quizplus · Accepted Answer

A lead time service level of 95 percent means there is a 95 percent probability that the demand during the lead time will not exceed the inventory available at the beginning of the lead time, ensuring customer demand is met without stockouts in 95 percent of cases.

Which One of the Following Is Implied by a Lead