Safety stock is the additional inventory held beyond the expected demand to mitigate the risk of stockouts caused by uncertainties in demand or supply chain disruptions. It acts as a buffer against variability in lead times, forecast inaccuracies, or unexpected spikes in customer demand. The primary goal of safety stock is to maintain service levels and prevent lost sales, ensuring continuous product availability.Determining the optimal safety stock level requires analyzing demand variability, lead time fluctuations, and desired service levels. Holding too much safety stock increases carrying costs and risks obsolescence, while too little can lead to frequent stockouts and customer dissatisfaction. Advanced inventory optimization models incorporate safety stock calculations to balance these trade-offs dynamically.
