Question

- Safety (Security) Stock:

A) This is the stock that is kept in order to meet the uncertainty in demand and delivery delays in the supply period.
B) This is especially necessary when demand is uncertain. Such stock is not required if demand is known precisely.
C) The optimal safety stock to be held is decided for opposite purposes: -
D) Minimization of stocking costs, - Minimization of stocking costs related to security stock.

Answer 1

A) This is the stock that is kept in order to meet the uncertainty in demand and delivery delays in the supply period.

Step-by-step explanation:

Companies sell products for profit. It is part of the companies strategy to have a stock that ensures that the company does not lose sales by not having the product at the time of demand. Safety stock serves to minimize the chance of the firm not having the product at a time when demand unexpectedly increases, or in cases where the supplier has unforeseen circumstances and delays delivery. Therefore, good inventory planning is important.