The key attribute to calculating the safety stock

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Reference no: EM132255474

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1. An item’s variation of demand during its lead time is the key attribute to calculating the safety stock for that item

2. Assume a part has a lead time is 1 month and the average demand is 100 units per month. If the review period is 1 month, and the safety stock is 50 units, the target level for this part should be 250 units

3. Acme Inc. has established policy that items they hold in inventory must not exceed 1 out of stock situation stockout every year. Assuming that ten orders/year are placed for a part the service level Acme wants is 90%

4. Acme has read about Just-In Time Inventory and wants to reduce its safety stock to zero. This should result in an average service level of 0%.

5. Acme Inc has a distribution center in Boston. The central warehouse is in Chicago. If the Boston distribution center places an order for 100 widgets to the Chicago warehouse, that order would be classified as independent demand.

Reference no: EM132255474

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