In the reorder level calculation, the extra stock kept to prevent stockouts is called:

In the reorder level calculation, the extra stock kept to prevent stockouts is called:

• A. maximum inventory level
• B. buffer inventory
• C. average lead time
• D. reorder quantity

Answer: (B)

Buffer inventory is the extra stock kept to guard against uncertainty in demand and supply. In the reorder level calculation, this protection (often called safety stock) is added to the expected demand during lead time to determine when to reorder. For example, if you expect 500 units to be used during lead time and you keep 200 units as a buffer, the reorder level would be 700 units. The other terms refer to different ideas: maximum inventory level is the upper stock limit, average lead time is the typical time to receive an order, and reorder quantity is the amount ordered each time.

Buffer inventory is the extra stock kept to guard against uncertainty in demand and supply. In the reorder level calculation, this protection (often called safety stock) is added to the expected demand during lead time to determine when to reorder. For example, if you expect 500 units to be used during lead time and you keep 200 units as a buffer, the reorder level would be 700 units. The other terms refer to different ideas: maximum inventory level is the upper stock limit, average lead time is the typical time to receive an order, and reorder quantity is the amount ordered each time.