Safety stock

Safety stock is an inventory buffer for uncertainty in demand or supply. It comes on top of the stock required for expected consumption during the replenishment lead time. It is not a substitute for reliable suppliers or sound processes, but a deliberate protection against variation.

When determining the buffer, you look at demand patterns, lead times, deviations, and the desired service level. A critical component with a variable lead time requires a different consideration than an easily replaceable item. Also check whether the calculation method used matches the demand pattern; sporadic demand often requires a different approach than stable daily consumption.

An appropriate safety stock reduces the risk of shortages, but also ties up capital and space. Excessively large buffers can conceal structural problems and increase obsolescence. By regularly reassessing buffers, you maintain a better balance between protection and inventory costs.