How does lead time impact the value of safety stock in global supply chains?
How does lead time impact the value of safety stock in global supply chains?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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How does lead time impact the value of safety stock in global supply chains?
Expert Solution
Step 1
Safety stock refers to the inventory kept on hand to counter the risk of stockouts because of the variabilities in supply and demand.
Safety stock is kept by considering the lead time in mind. It is obvious that the longer the lead time the more the safety stock should be kept to compensate for the stockouts.
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