The amount of inventory needed to maintain a continuing supply is called?

The amount of inventory needed to maintain a continuing supply is called?

• A. Economic order quantity
• B. Reorder point
• C. Safety stock
• D. Par stock

Answer: (D)

Maintaining a continuing supply hinges on keeping a prescribed on-hand quantity known as par stock. Par stock is the target amount you want to have available to cover normal demand, so when inventory falls to that level you replenish back up to par. This ensures operations can continue smoothly without stockouts. This differs from safety stock, which is extra cushion held specifically to guard against demand or supply variability; par stock is the regular on-hand target. It also differs from the reorder point, which is the specific level that triggers a new order based on lead time and expected usage, and from economic order quantity, which focuses on the most cost-efficient order size rather than maintaining a constant on-hand level.

Maintaining a continuing supply hinges on keeping a prescribed on-hand quantity known as par stock. Par stock is the target amount you want to have available to cover normal demand, so when inventory falls to that level you replenish back up to par. This ensures operations can continue smoothly without stockouts.

This differs from safety stock, which is extra cushion held specifically to guard against demand or supply variability; par stock is the regular on-hand target. It also differs from the reorder point, which is the specific level that triggers a new order based on lead time and expected usage, and from economic order quantity, which focuses on the most cost-efficient order size rather than maintaining a constant on-hand level.