Certified Supply Chain Professional (CSCP) Practice Exam

What are the three common methods for determining safety stock levels?

1. Fixed amount, coverage, and statistical

2. FIFO, LIFO, and average cost

3. Just-in-time, reorder point, and economic order quantity

4. Fixed point, variable point, and review point

The correct answer is: Fixed amount, coverage, and statistical

The choice highlighting fixed amount, coverage, and statistical methods is the correct approach for determining safety stock levels because these methods incorporate various strategies to ensure inventory buffers are adequately maintained. Fixed amount refers to a predetermined quantity of safety stock that is kept on hand regardless of the demand or variability, providing a straightforward method to ensure stock availability. Coverage involves calculating the amount of inventory needed to cover potential demand over a specific lead time, which helps organizations maintain service levels even in the face of fluctuations in demand or supply disruptions. Statistical methods are based on historical data analysis, utilizing demand forecasts and variability to determine the optimal safety stock levels, thus allowing organizations to make data-driven decisions to mitigate the risks of stockouts. Together, these three methods provide a comprehensive framework for managing safety stock effectively, taking into account both qualitative and quantitative aspects of inventory management. Other choices listed, while relevant in inventory management, do not directly pertain to safety stock levels.