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A supply manager is reviewing safety stock for a particular unit. The unit is small, Inexpensive, non-perishable, and easily stored, but is critical to the firm's manufacturing process. The following information is known about this unit: Maximum lead time = 8 Days Average lead time = 3 Days Maximum daily usage = 6,000 Units Average daily usage = 4,000 Units What is the maximum safety stock that should be maintained for this unit?
Correct Answer: C
The maximum safety stock is calculated using the formula: (Maximum lead time - Average lead time) x Maximum daily usage. This results in (8 - 3) x 6,000 = 30,000 units. Adding the average usage during average lead time (3 days x 4,000 units = 12,000 units) gives a total of 36,000 units for safety stock. References: Safety stock calculations help in managing inventory to prevent stockouts during lead time variations.