Shortage occurs in a replenishment cycle only if the demand during the lead time exceeds the ROP.

Question

Quizplus · Accepted Answer

This is the basic definition of shortage in a replenishment system. If the demand during the lead time (the time it takes to receive a new shipment) is greater than the ROP (reorder point), then the inventory level will fall below the desired level and a shortage will occur. Conversely, if the ROP is set correctly and the demand during lead time is met or exceeded by the incoming inventory, then there will be no shortage.

Shortage Occurs in a Replenishment Cycle Only If the Demand