If the variability of sales decreases, the company will be able to hold a lower level of safety stock because they are better able to predict the inventory needs while they wait for an order to be filled.
If the cost of holding decreases the company will probably increase their level of safety stock. This is because the company needs to balance the cost of holding inventory with the cost of a stockout in order to determine the level of safety stock. If the cost of holding inventory decreases, they will be able to hold more inventory to avoid the cost of a stockout.
If the level of sales falls permanently, the company will be able to reduce their level of safety stock.
If the cost of running out of stock (a stockout) decreases the company will hold less safety stock because the cost of running out is now smaller. This is because the company needs to balance the cost of holding inventory with the cost of a stockout in order to determine the level of safety stock. If the cost of a stockout decreases, they will be able to hold less inventory since the cost of s tockout is now smaller.
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