Whats the logic behind safety stock?

Question

Accepted Answer

Safety stock is a buffer inventory kept to mitigate the risk of stockouts due to unexpected demand or supply chain disruptions.

Safety stock helps to ensure that there is enough inventory to meet customer demand even during unexpected events.
It is calculated based on factors such as lead time, demand variability, and service level.
The level of safety stock required varies depending on the industry, product, and supply chain complexity.
For example, a company that sells seasonal products may need to keep higher levels of safety stock to meet demand during peak season.
On the other hand, a company that has a more predictable demand may need lower levels of safety stock.
Safety stock can be expensive to maintain, so it is important to strike a balance between having enough inventory and minimizing costs.

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