Safety stock is defined as the extra stock that is preserved by a business entity to minimize the risk of a shortfall in their existing stocks.
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This means applying and customizing safety stock formulas to meet business needs based on historical. Wiktionary(5.00 / 1 vote)rate this adequate safety stock levels permit business operations to proceed according to their plans. Safety stock is a term used by logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material or packaging) caused by uncertainties in supply and demand.
During these situations, safety stock acts as your defense against a possible stockout scenario and helps you fulfill your orders until your ordered stock is delivered to you.
Stockouts stem from factors such as fluctuating customer demand, forecast inaccuracy, and variability in lead times for raw materials or manufacturing. You can think of this like just in case inventory. Safety stock acts as a buffer in case the sales of an item are greater than planned and/or the company's supplier is unable to deliver. A store keeps a reserve of several items available so it can compensate for unexpected fluctuations in.
