ECONOMICS

Detailed explanation-1: -Safety stock is an extra quantity of a product which is stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand.

Detailed explanation-2: -Safety stock, also known as “buffer stock, ” is inventory that is above and beyond what is actually needed to meet anticipated demand. A quantity of stock planned to be in inventory to protect against fluctuations in demand or supply.

Detailed explanation-3: -What percentage of inventory should be safety stock? The percentage of inventory that should be safety stock will vary from business to business. For most businesses, about 50% of the average amount of inventory you use during your reorder lead time is a sufficient amount of safety stock.

Detailed explanation-4: -While cycle stock inventory is held to meet most of the projected sales, safety stock is held to cover demand fluctuations and it involves many variables, including unexpected changes in supply or delivery lead times.

Detailed explanation-5: -Also known as “buffer stock” or “backup inventory”, safety stock is surplus inventory retailers purchase in addition to their typical cycle stock to mitigate the risk of facing a potential stockout situation.