What is a ‘Safety Stock Inventory’?It is the extra inventory being ordered beyond expected demand It is ordering less than the demanded number

Safety Stock Inventory is a term used in inventory management that refers to the extra units of a product that a company keeps in its inventory to prevent stockouts (shortages). This inventory acts as a buffer in case the demand for a product increases unexpectedly or if there is a delay in the supply chain that prevents the timely restocking of the product.

The purpose of safety stock inventory is to ensure that business operations can continue smoothly without any interruptions due to product shortages. It is a risk management strategy that helps businesses cope with uncertainties in supply and demand.

However, maintaining safety stock inventory also involves carrying costs, including storage and insurance. Therefore, businesses need to find a balance between having enough safety stock to prevent stockouts and minimizing the costs associated with holding this extra inventory.

So, it is not about ordering less than the demanded number, but rather about having an extra stock to cover unexpected situations.