Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

11.7.3 Exercise: Safety Stock Variation versus Demand Variation

Intended learning outcomes: Find out whether the safety stock level increases with increasing demand.

This exercise refers to Subsection 11.3.3.

True or false: The safety stock level increases with increasing demand.


As the formula in Figure shows, this statement is generally not correct. The safety stock depends on the standard deviation of the demand during the lead time. Increasing demand does not automatically increase either the standard deviation during the statistical period or the lead time.

Course section 11.7: Subsections and their intended learning outcomes

  • 11.7.5 Scenario: Effectiveness of the Order Point Technique

    Intended learning outcomes: Explore the changing shape of the inventory curve for continuous and less continuous demand.

  • 11.7 Scenarios and Exercises

    Intended learning outcomes: Calculate examples for the ABC Classification. Disclose the ABC-XYZ analysis in materials management. Differentiate between safety stock variation and demand variation. Determine batch size depending on stockout costs. Assess the effectiveness of the order point technique.