Safety stock, sometimes referred to as buffer stock, is the excess inventory kept on hand to guard against supply or demand fluctuations. It serves as a buffer against stockouts brought on by peaks in demand, hold-ups in lead times, or interruptions in the supply chain. A crucial component of inventory optimization is figuring out the ideal buffer stock levels, which entails examining lead time variations, supplier dependability, and demand variability. Excessive buffers raise carrying costs and tie up capital, even though buffer stock improves service levels.
