A supply manager is reviewing safety stock for a particular unit. The unit is small, Inexpensive, non-perishable, and easily stored, but is critical to the firm’s manufacturing process.
The following information is known about this unit:
Maximum lead time = 8 Days
Average lead time = 3 Days
Maximum daily usage = 6,000 Units
Average daily usage = 4,000 Units
What is the maximum safety stock that should be maintained for this unit?
A . 12,000
B . 10,000
C . 36,000
D . 48,000
Answer: C
Explanation:
The maximum safety stock is calculated using the formula: (Maximum lead time – Average lead time) x Maximum daily usage. This results in (8 – 3) x 6,000 = 30,000 units. Adding the average usage during average lead time (3 days x 4,000 units = 12,000 units) gives a total of 36,000 units for safety stock.
Reference: Safety stock calculations help in managing inventory to prevent stockouts during lead time variations.
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