CAF-5 · Chapter 18 · Question 16 of 20
(Inventory Management: Safety Stock & Lead Time Probabilities) Consumption is 100 units/day. Lead time is normally 5 days (60%), 6 days (30%), or 7 days (10%). If ROL is set at maximum expected demand, what is the average buffer (safety) stock held?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 150 units
Explanation
ROL = Max Demand during Lead Time = 100 * 7 = 700 units. Average Lead Time = (5*0.6 + 6*0.3 + 7*0.1) = 5.5 days. Average Demand during LT = 100 * 5.5 = 550 units. Safety Stock = ROL - Avg Demand during LT = 700 - 550 = 150 units.
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