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An organization sells a product for which demand is uncertain. Management would like to ensure that there is sufficient inventory on hand during periods of high demand so that it does not lose sales (and customers). To do so, the organization should:
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B. Use a just-in-time inventory system.
C. Keep a safety stock.
D. Employ a materials requirements planning system.
Answer: C
Explanation:
Safety stock is inventory maintained to reduce the number of stock outs resulting from higher-than-expected demand during lead time. Maintaining a safety stock avoids the costs of stock outs, e.g., lost sales and customer dissatisfaction.
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