Safety Stock
Inventory ManagementSafety stock (or buffer stock) is extra inventory held above the forecasted demand to protect against demand variability, supply chain disruptions, or forecasting errors. Safety stock helps prevent stockouts and ensures customer orders can be fulfilled even when demand spikes unexpectedly. The level of safety stock is determined by demand variability and lead times. Holding excess safety stock increases carrying costs, while too little risks lost sales, making optimization critical for cost management.
Related Terms
Lead Time
Lead time is the duration between placing a purchase order with a supplier and receiving the goods into the warehouse.
Dead Stock
Dead stock refers to inventory that has not sold in a long time and is unlikely to sell in the future.
SKU (Stock Keeping Unit)
A Stock Keeping Unit (SKU) is a unique alphanumeric code assigned to each distinct product or variant in inventory.