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The level of safety stock in inventory management depends on all of the following, except the:
Suggested Answer: D
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Choice 'd' is correct. Reorder costs do not impact the level of safety stock.
Choices 'a', 'b', and 'c' are incorrect. Safety stock levels are affected by:
1. Uncertain sales forecasts - greater uncertainty means a higher level of safety stock should be carried.
2. Dissatisfaction of customers - if customers are dissatisfied with back orders (which occur when there are stock outs), then more safety stock should be carried to prevent stock outs.
3. Uncertain lead times - greater uncertainty means a higher level of safety stock is needed.
8 comments · newest first
TO
Tori
11 months ago
Not sure about that last one, seems like it could impact decisions.
MI
Miss
12 months ago
Wait, are we really saying reorder costs don't matter?
XO
Xochitl
12 months ago
I think customer dissatisfaction should be a factor, though.
VA
Vashti
12 months ago
Totally agree, lead-time uncertainty matters too!
DA
Daniel
1 year ago
Safety stock is definitely influenced by sales forecast uncertainty.
TY
Tyisha
1 year ago
I'm a bit unsure about this one. The options don't seem super clear to me. I might have to do some quick research on character encoding conversion tools before making a guess.
JA
Janine
1 year ago
This looks like a classic set theory problem. I think I can solve this by using the inclusion-exclusion principle.
FR
Franklyn
1 year ago
Hmm, this is a tricky one. I'll need to carefully consider the options and think about the key characteristics of a ready product backlog item.