Which statement defines cycle stock in inventory management?

• A. The portion of inventory replenished regularly to meet expected demand between orders.
• B. The safety stock kept to cover demand variability.
• C. The inventory that is obsolete.
• D. The total inventory in the warehouse.

Answer: (C)

Cycle stock is the portion of inventory that's kept specifically to meet the normal, expected demand during the interval between replenishments. It is the quantity you replenish on each order and then consume as demand occurs until the next order arrives. If demand is steady and lead times are predictable, the average level of cycle stock sits around half of the order quantity, since you start the cycle with a full replenishment and end it as you’ve used it up.

This is distinct from safety stock, which is extra held to cover variability in demand or supply, and from obsolete inventory, which can no longer be used. Total inventory includes cycle stock plus safety stock, plus any inventory in transit and any obsolete stock, all of which together represent everything the firm is holding.