If demand for an item is normally distributed, we plan for demand to be twice the average demand and carry 2 standard deviations worth of safety stock inventory.

Question

Quizplus · Accepted Answer

This statement is incomplete and incorrect. It's not enough to know that demand is normally distributed and twice the average - we need to know the standard deviation of demand as well to calculate safety stock inventory. Additionally, carrying 2 standard deviations worth of safety stock is not a one-size-fits-all solution and should be determined based on specific factors such as lead time and desired service level.

If Demand for an Item Is Normally Distributed, We Plan