Question

Greater variability in usage results in a smaller needed safety stock. True False

Answer 1

Safety stock inventory, sometimes called buffer stock, is a term used by inventory managers to describe a level of extra stock that is maintained to mitigate risk of stockouts or due to uncertainties in supply and demand. Safety stock protects against variability in both demand and lead times.Safety stock is designed to prevent stock outs when there is variability in your demand and supply. Changes in your mean lead time and demand affect your cycle stock but not your safety stock. By reducing the variability, you reduce your safety stock. And thus greater variability in usage leads to increased safety stock. Thus the said statement is FALSE