CIM Safety Stock & Reorder Points 2

Question 1

A company experiences average daily demand of 50 units with a lead time of 8 days. What is the basic reorder point (without safety stock)?

Accepted Answer

400 units

Answer

Basic ROP = Average daily demand × Lead time = 50 × 8 = 400 units.

Question 2

Which statistical measure is used to quantify demand variability when calculating safety stock using the standard deviation method?

Accepted Answer

Standard deviation of demand

Answer

Safety stock calculations using the statistical method rely on the standard deviation of demand to measure variability.

Question 3

A service level of 95% corresponds to a z-score of approximately 1.65. If lead time demand standard deviation is 30 units, what is the safety stock?

Accepted Answer

49.5 units

Answer

Safety stock = z × σLTD = 1.65 × 30 = 49.5 units.

Question 4

What happens to the reorder point when supplier lead time increases, assuming all other variables remain constant?

Accepted Answer

Reorder point increases

Answer

A longer lead time means more inventory is consumed before replenishment arrives, raising the reorder point.

Question 5

Which approach to setting safety stock is most appropriate when demand data is limited or highly irregular?

Accepted Answer

Judgment-based or percentage-of-lead-time-demand method

Answer

When data is sparse or irregular, judgment-based or simple percentage methods provide practical safety stock estimates.

(CIM) Certified Inventory Manager Practice Test