CPIM Practice Exam

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How is demand during lead time calculated?

Units per period multiplied by safety stock
Units per period multiplied by lead time
Annual demand multiplied by lead time
Lot size quantity divided by lead time

The correct answer is: Units per period multiplied by lead time

Demand during lead time is calculated as the units demanded per period multiplied by the lead time in the same time unit. This method effectively accounts for the total number of units that will be required while waiting for an order to arrive. For instance, if a business expects to sell 100 units per week and has a lead time of two weeks for an order, the total demand during that lead time would be calculated as 100 units/week * 2 weeks = 200 units. In this context, understanding lead time is crucial for inventory management because it helps in determining how much stock needs to be on hand to meet customer demand without delay.