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What's That? Safety Stock

From a surface perspective, safety stock is 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.

In logistics, adequate safety stock levels permit business operations to proceed according to their plans. Safety stock is held when uncertainty exists in demand, supply, or manufacturing yield, and serves as an insurance against stockouts.  It is carried to satisfy demand subject to unpredictable demand fluctuations and to reduce product shortages. This type of inventory cushion is also called buffer inventory.

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