ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Safety stock:
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Goods kept in store to cover seasonal demand e.g., Summer Sale
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Goods kept in store to cover unforeseen shortages or fluctuation in demand
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -Safety stock is an extra quantity of a product which is stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand.
Detailed explanation-2: -Safety stock compensates for forecast inaccuracy and demand fluctuations, covering the demand until the supply chain can replenish the gap. In other words, safety stock is a demand buffer.
Detailed explanation-3: -For example, if you sell 100 products per day you want to have five days’ worth of safety stock. The calculation is 100 (products) x 5 (days worth of stock) giving you a safety stock of 500 units.
There is 1 question to complete.