According to the "Minimum Stock Formula", what do we need to consider when deciding on the quantity of products to be ordered ?

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Question restated: According to the "Minimum Stock Formula", what do we need to consider when deciding on the quantity of products to be ordered?

Option a: 'Last ordered stock' — This choice suggests basing the order quantity on the most recent purchase quantity. While past orders can influence patterns, the minimum stock formula focuses on buffering against uncertainty rather than repeating a previous order size. Therefore this option does not capture the core concept of maintaining a safety buffer.

Option b: 'Safety stock' — This is the essence of the Minimum Stock Formula. Safety stock is the extra quantity kept on hand to guard against variability in demand and lead time, ensuring we don’t stock out during uncertain periods. It directly determines the minimum level that should be maintained and hence informs how much to order to maintain service levels.

Option c: 'Available stock' — Available stock reflects what is currently on hand and available for sale. While it is an important metric for operational decisions, it does not by itself define the minimum reserve or buffer needed for uncertain future demand inherent in the Minimum Stock Formula.

Option d: 'Stock control' — Stock control refers to the broader process of managing inventory, including recording, tracking, and managing stock levels. While essential for inventory management, it is a framework or activity, not the specific quantity component used in the Minimum Stock Formula to decide how much to order.

In summary, the reasoning behind each option shows that only safety stock directly addresses the buffer needed to determine the minimum order quantity under the formula, whereas the other options relate to aspects of inventory data, past orders, or process concepts that do not define the minimum stock amount to order.

2025.1 CH EY-IHB1004 Rooms Division

According to the "Minimum Stock Formula", what do we need to consider when deciding on the quantity of products to be ordered ?

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