QUESTION 14 Assume a continuous review (Q) inventory control system. What should

Question

QUESTION 14 Assume a continuous review (Q) inventory control system. What should be the effect of the following change on safety stock (assuming that they adjust their order practices accordingly)? If the company switches carriers (trucking companies), which results in a longer lead time on orders from the supplier, then safety stock should a. increase D. decrease C not be changed (stay the same) QUESTION 15 Assume a continuous review (Q) inventory control system. What should be the effect of the following change on safety stock (assuming that they adjust their order practices accordingly)? If the company has a shift in corporate strategy and decides to emphasize low cost operations, at the expense of service to the customer, then safety stock should_K a. increase Ob. decrease not be changed (stay the same) QUESTION 16 Assume a continuous review (Q) inventory control system. What should be the effect of the following change on safety stock (assuming that they adjust their order practices accordingly)? If consumer behavior becomes more erratic and fluctuates more from period-to-period than it has in the past, then safety stock should a. increase b. decrease C. not be changed (stay the same)

Explanation / Answer

Q14) Increase in the lead time will increase the safety stock as the lead time increases as the formula suggests -

Safety Stock = z*D*L

Q15) As service level decreases, z value decreases and hence Safety stock is decreased as per the equation.

Q16) As the Variability in demand D increases, Safety stock increases

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