Which of the following statements represents a major assumption needed to effectively use days of supply as a measure?
Which of the following statements represents a major assumption needed to effectively use days of supply as a measure?
To effectively use days of supply as a measure, the forecast for the item usage needs to be reasonably accurate. Days of supply is calculated by dividing the on-hand inventory by the average daily demand. Without an accurate forecast of item usage, this measure would be unreliable and potentially misleading.
Days of Supply formula = On-hand inventory/Avg. Daily Demand Therefore, one has to have a decent level of accuracy in the demand forecast to be able to use this measure properly.
I think the answer should be B
Option B seems to be the most accurate. I fail to see how it can be D. Any thoughts?
The forecast for the item usage is reasonably accurate.
Forecast has to be reasonably accurate to use days of supply or else demand could strip supply at a higher rate and your calcs would be wrong. I agree they that mgmt would want to know days of supply but that is not an input into days of supply calc
The answer is “C”, mgmt would want to know days of supply for a growth product.