What is Safety Stock?

Safety stock is a term used in inventory management to refer to the extra inventory that is kept on hand to guard against the risk of stockouts or shortages. It is essentially a buffer that is maintained above and beyond the expected demand for a particular item, and it is intended to ensure that there is always enough inventory available to meet customer demand, even if unexpected fluctuations occur. Safety stock is typically calculated based on factors such as lead time, demand variability, and service level targets, and it can be adjusted over time based on changes in these factors. The goal of safety stock is to strike a balance between the costs of carrying excess inventory and the costs of stockouts or shortages, in order to maximize overall efficiency and customer satisfaction.