What is the primary purpose of safety stock in supply chain management?

What is the primary purpose of safety stock in supply chain management?

• A. To reduce lead time
• B. To hedge against demand variability and supplier delays
• C. To increase production speed
• D. To optimize floor space

Answer: (B)

Safety stock is extra inventory kept to cover uncertainty in demand and in supplier performance. The main idea is to have a cushion so you can still meet customer orders if demand spikes or a supplier delivers late, reducing the risk of stockouts and backorders. It doesn’t shorten lead times or speed up production, and it increases on-hand inventory (and storage costs) rather than optimizing space or speeding up operations. So the primary purpose is to hedge against variability and delays in both demand and supply.

Safety stock is extra inventory kept to cover uncertainty in demand and in supplier performance. The main idea is to have a cushion so you can still meet customer orders if demand spikes or a supplier delivers late, reducing the risk of stockouts and backorders. It doesn’t shorten lead times or speed up production, and it increases on-hand inventory (and storage costs) rather than optimizing space or speeding up operations. So the primary purpose is to hedge against variability and delays in both demand and supply.