In master scheduling, what does hedging refer to?

Hedging in the context of master scheduling primarily involves providing safety inventory as a buffer against uncertainties in demand. This practice is crucial for ensuring that a company can meet customer needs even when actual demand exceeds forecasts. By maintaining safety inventory, a business can avoid stockouts and the potential loss of sales that can occur when demand spikes unexpectedly.

The rationale behind this is that forecasts are inherently uncertain, and while they serve as a guideline, actual sales can fluctuate due to various external factors. For example, market trends, seasonal spikes, or unforeseen events can cause demand to surge beyond what was anticipated. Therefore, having additional inventory on hand allows a company to respond effectively to these variations.

This approach helps maintain customer satisfaction and ensures smoother operations, making it essential for effective master scheduling. The other options, while related to inventory and capacity planning, do not specifically capture the essence of hedging against demand fluctuations. They address different aspects of supply chain management, such as lead time, option sizes, and work center overloads, rather than focusing specifically on meeting higher-than-expected volume demands.