The costs of overstocking and understocking have a direct impact on
A) the optimal cycle service level but not profitability.
B) profitability but not the optimal cycle service level.
C) both the optimal cycle service level and profitability.
D) neither the optimal cycle service level or profitability.

Question

Quizplus · Accepted Answer

Both overstocking and understocking can lead to decreased profitability and affect the optimal cycle service level. Overstocking can result in increased costs due to excess inventory and potential obsolescence, while understocking can result in lost sales and customers. Finding the optimal balance between inventory levels and customer demand is crucial for achieving both a desirable cycle service level and profitability.

The Costs of Overstocking and Understocking Have a Direct Impact