CIM Safety Stock & Reorder Points 4

Question 1

A retailer's lead time demand averages 500 units with a standard deviation of 40 units. At a 99% service level (z = 2.33), what is the safety stock?

Accepted Answer

93.2 units

Answer

Safety stock = z × σ = 2.33 × 40 = 93.2 units.

Question 2

Which of the following would cause a company to REDUCE its safety stock levels?

Accepted Answer

Supplier lead times become more consistent and predictable

Answer

More consistent lead times reduce variability, lowering the uncertainty safety stock is designed to buffer against.

Question 3

In the formula ROP = (Average daily demand × Lead time) + Safety stock, what does the first term represent?

Accepted Answer

Expected demand during the replenishment lead time

Answer

Average daily demand multiplied by lead time gives the expected (average) consumption while waiting for the order to arrive.

Question 4

A manager wants to reduce inventory costs but maintain service levels. Which strategy best addresses safety stock without changing service level targets?

Accepted Answer

Work with suppliers to reduce lead time variability

Answer

Reducing lead time variability lowers σ in the safety stock formula, cutting safety stock while maintaining the same service level.

Question 5

Which of the following best defines 'cycle service level' in the context of safety stock?

Accepted Answer

The probability of not stocking out during a single replenishment cycle

Answer

Cycle service level (CSL) measures the probability of avoiding a stockout in any given replenishment cycle.

(CIM) Certified Inventory Manager Practice Test

(CIM) Certified Inventory Manager Practice Test

CIM Safety Stock & Reorder Points 4