What does safety stock help mitigate?

Safety stock primarily serves to mitigate stockouts due to demand variability. In inventory management, demand for products can fluctuate based on various factors such as seasonal changes, market trends, and consumer behavior. These fluctuations make it challenging to predict the exact inventory levels needed to satisfy customer demand consistently.

By maintaining a safety stock, businesses can cushion against these unpredictable changes in demand. This additional inventory acts as a buffer, ensuring that there are enough products on hand to meet unexpected surges in demand or to cover any inaccuracies in forecasting. As a result, safety stock is crucial in maintaining service levels and minimizing the risk of losing sales due to items being out of stock.

Other factors, such as supplier shortages and transport delays, can impact inventory levels, but safety stock is specifically designed to address variability in demand rather than these other supply chain disruptions. Therefore, the presence of safety stock helps ensure continuity in operations and customer satisfaction by reducing the likelihood of stockouts.