Asked by Shilpa Heald on Jun 19, 2024

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If demand is not uniform and constant, then stockout risks can be controlled by all of the following except

A) increasing the EOQ.
B) placing an extra order.
C) raising the selling price to reduce demand.
D) adding safety stock.
E) reducing the reorder point.

Stockout Risks

The potential for inventory shortages that can result in lost sales, customer dissatisfaction, and negative impacts on a business's reputation and income.

EOQ

Economic Order Quantity, a formula used in inventory management to determine the optimal order size that minimizes total inventory costs.

Safety Stock

Additional inventory kept in reserve to protect against stockouts due to variability in demand or supply.

  • Appreciate the importance of demand variability in inventory management and methods to manage it.
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SZ
samia zafarJun 20, 2024
Final Answer :
E
Explanation :
Increasing the Economic Order Quantity (EOQ) does not directly control stockout risks in the face of variable demand; it optimizes order size to balance ordering and holding costs. Placing extra orders, raising selling prices to reduce demand, and adding safety stock are all strategies to mitigate stockout risks. Reducing the reorder point, however, would likely increase the risk of stockouts by triggering orders too late to meet unexpected increases in demand.