Safety Stock & Reorder Points Flashcards
7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Safety Stock & Reorder Points flashcards as text
A firm has variable lead times with an average of 10 days and a standard deviation of 2 days. Average daily demand is 20 units. Which factor contributes to safety stock need in this scenario?
Answer: Lead time variability
Variable lead times create uncertainty about when stock will arrive, requiring safety stock to cover the variability.
When both demand and lead time are variable, the combined standard deviation for safety stock calculations is best described as:
Answer: A function of both demand variability and lead time variability
Combined variability accounts for both demand and lead time standard deviations using a composite formula.
A C-class item has high demand variability. How should safety stock policy typically differ from an A-class item?
Answer: C-class items may carry proportionally less safety stock due to lower value impact
ABC analysis typically applies tighter controls and higher service levels to high-value A-class items, while C-class items may receive simpler, leaner policies.
Which term describes the point at which on-hand inventory equals the reorder point triggering a new purchase order?
Answer: Reorder point trigger
When inventory falls to the reorder point level, it triggers a replenishment order to be placed.
A seasonal product has demand spikes during Q4. What is the most appropriate adjustment to safety stock during that period?
Answer: Increase safety stock to reflect higher demand variability
Higher demand variability during peak seasons increases the risk of stockouts, warranting higher safety stock.
A company uses a periodic review system (P system). How does safety stock in a P system typically compare to a continuous review system (Q system)?
Answer: P system requires more safety stock because it covers the review period plus lead time
In a P system, safety stock must cover uncertainty over the review period plus lead time, which is longer than lead time alone.
What is the primary purpose of the reorder point in a continuous review inventory system?
Answer: To signal when to place a replenishment order so stock doesn't run out during lead time
The reorder point ensures that a replenishment order is placed early enough that stock arrives before inventory is depleted.