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 that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D) The probability is .95 that demand during lead time will not exceed the amount on hand at the beginning of lead time.
E) The probability is .95 that the order will arrive after the on-hand inventory is exhausted.

Question

Quizplus · Accepted Answer

A lead time service level of 95 percent implies 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 means that there is a high likelihood that inventory will be sufficient to meet demand during lead time for 95 percent of orders.

Which One of the Following Is Implied by a Lead