What is Safety stock?
Safety stock is additional inventory held to absorb uncertainty in demand and lead time. A blanket buffer ignores differences in volatility and importance. Optimal safety stock balances target service level with tied-up capital.
Practical example
A stable basic item needs less buffer than a campaign product with volatile demand and unreliable lead time.
What teams should remember
- Safety stock is additional inventory held to absorb uncertainty in demand and lead time.
- A blanket buffer ignores differences in volatility and importance. Optimal safety stock balances target service level with tied-up capital.