Which of the following best describes the relationship between a service level and safety stock?

Which of the following best describes the relationship between a service level and safety stock?
A . A safety stock is not always required to achieve a required service level
B. A service level decreases in proportion to a decrease in safety stock
C. When safety stock is zero the service level always equals zero.
D. A service level increases in proportion to an increase in safety stock

View Answer

Answer: A

Explanation:

Holding extra stocks will always improve customer service levels, or at least reduce the risk of them falling. This implies that if an organisation aims at higher service levels, they should have larger safety stock. However, increasing safety stock is not the only solution to improve service level. The widespread adoption of just-in-time (JIT) techniques particularly in the automotive industry has greatly reduced costs with increased service levels as well as the additional benefit of increased problem visibility.

The correct answer should be ‘A safety stock is not always required to achieve a required service level’.

Reference: CIPS study guide page 104-105

LO 2, AC 2.2