What does Safety Stock help mitigate?

Safety stock serves as a buffer to mitigate the risk of stockouts which can occur due to variability in both demand and supply. In other words, it helps ensure that an organization can meet customer demand even when unforeseen fluctuations arise. These fluctuations may include an unexpected increase in demand or delays in supply, such as late shipments from suppliers or variability in production processes.

By maintaining a certain level of safety stock, a company can protect itself against these uncertainties, ensuring continuous availability of products and services. This approach is particularly important in industries where demand can be unpredictable or when lead times for replenishment are long. Overall, safety stock is a critical component in inventory management as it helps maintain customer satisfaction and reduces the risk of lost sales.