Which of the following factors is the key determinant of safety stock for finished goods?
Which of the following factors is the key determinant of safety stock for finished goods?
The desired service level is the key determinant of safety stock for finished goods. It represents the probability of not facing a stockout and ensures that there is sufficient inventory to meet customer demand without delays. Higher service levels require more safety stock to cover uncertainties in demand and lead time, aligning directly with the objective of maintaining stock availability.
The desired service level represents the probability of not facing a stockout, or in other words, the level of stock availability a company aims to maintain to meet customer demand without delay.