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 95 percent that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D)The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time.
E)none of the above

Question

Quizplus · Accepted Answer

A lead time service level of 95 percent means that there is a 95 percent probability that demand during lead time will not exceed the amount on hand at the beginning of lead time. This is because the service level refers to the probability of meeting demand during lead time with available inventory, implying that a certain amount of safety stock or buffer inventory is maintained to achieve this service level.

Which One of the Following Is Implied by a "Lead