MANAGEMENT

Detailed explanation-1: -A buffer is a margin for error around an estimate. In cases where there is significant uncertainty or the cost of being wrong is significant, including a buffer is wise. The buffer helps protect the project against the impact of the uncertainty.

Detailed explanation-2: -Uncertainties in demand forecasting The analysis of past and present markets, which serve as the springboard for the projection exercise, may be vitiated by the following inadequacies of data: Lack of Standardization: Data pertaining to market features like product, price, quantity, cost, income, etc.

Detailed explanation-3: -In theory, the logic of MRP would preclude the use of buffering. In reality, uncertainty exists in the production system in various stages. Buffering is a primary means of protecting against degradation of performance due to the uncertainty.

Detailed explanation-4: -The buffering function of inventory involves protecting the business or supply chain against three types of uncertainty: Uncertainty of future demand. This type of uncertainty results from the fact that demand usually fluctuates from period to period; causing a probability that demand may be more than the forecast.