Certified Supply Chain Professional (CSCP) Practice Exam

How is coverage determined in a safety stock context?

1. By the total inventory held at all times

2. By personnel availability for handling inventory

3. By setting safety stock for a given period according to demand

4. By monitoring the sales forecasts continuously

The correct answer is: By setting safety stock for a given period according to demand

In the context of safety stock, coverage is determined by setting safety stock for a given period according to demand. Safety stock serves as a buffer to mitigate the risks of stockouts caused by variability in demand and lead time. By assessing historical demand patterns and estimating future requirements, organizations can establish an appropriate level of safety stock that reflects the expected demand during a specific period. This approach helps in maintaining service levels while minimizing excess inventory costs. Safety stock calculations often take into account factors such as lead time variability, demand variability, and the desired service level. By aligning safety stock with the anticipated demand for a designated time frame, organizations can more effectively manage inventory levels and ensure they have sufficient stock to meet customer needs without overstocking. In contrast, the total inventory held at all times includes all stock on hand, which doesn't specifically address the safety stock aspect. Personnel availability for handling inventory relates to operational capabilities but does not influence safety stock determination directly. Continuous monitoring of sales forecasts is important for demand planning but does not directly define how safety stock levels are established in terms of the period they cover.