On what basis minimum, maximum and safety stock is defined ?

Question

Accepted Answer

Minimum, maximum and safety stock are defined based on demand, lead time, and desired service level.

Minimum stock is defined as the lowest level of inventory required to meet demand during lead time.
Maximum stock is defined as the highest level of inventory that can be held without incurring excessive costs.
Safety stock is defined as the buffer stock held to mitigate the risk of stockouts due to demand variability or lead time uncertainty.
The levels of minimum, maximum, and safety stock are determined based on the desired service level, which is the probability of meeting demand during lead time.
Factors such as seasonality, supplier reliability, and production lead time also influence the levels of minimum, maximum, and safety stock.

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