Table of Contents
What stock level sets the lowest acceptable limit for operations?
Learn which stock level represents the lowest acceptable limit for operations in inventory management and why the minimum stock level safeguards continuous production and service by preventing stockouts.
Question
Which stock level indicates the lowest acceptable limit for operations?
A. Ordering level
B. Safety stock
C. Maximum stock level
D. Minimum stock level
Answer
D. Minimum stock level
Explanation
Minimum stock ensures uninterrupted operations.
The minimum stock level (also called minimum inventory level) is the lowest quantity that should be held to ensure operations are not disrupted by stockouts, acting as a floor below which replenishment must occur to maintain continuity.
Key distinctions:
- Ordering level: The trigger point to place a new order, typically the reorder point, not the lowest permissible level.
- Safety stock: A buffer above the minimum to absorb demand or lead-time variability; it supports but is not itself the lowest operational limit.
- Maximum stock level: The upper limit set to avoid overstock, carrying cost, and obsolescence, unrelated to the lowest acceptable level.
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