If demand is not uniform and constant, then stockout risks can be controlled by
A) increasing the EOQ
B) placing an extra order
C) raising the selling price to reduce demand
D) adding safety stock
E) reducing the reorder point

Question

Quizplus · Accepted Answer

Adding safety stock is the best choice to control stockout risks when demand is not uniform and constant. Safety stock is an amount of inventory that is held in reserve to protect against stockouts caused by unanticipated increases in demand, supply chain disruptions or errors in demand forecasts. By having additional inventory in reserve, a company can reduce the risk of running out of stock and ensure that it can meet customer demand even during periods of high variability in demand. Other choices such as increasing the EOQ, placing an extra order, raising the selling price to reduce demand or reducing the reorder point are not effective in controlling stockout risks caused by demand variability.

If Demand Is Not Uniform and Constant, Then Stockout Risks