Which of the following is a benefit of Safety Stock?

Safety stock is an additional quantity of inventory maintained to mitigate the risk of stockouts caused by uncertainties in supply and demand. One of the primary benefits of having safety stock is that it helps to prevent stockouts during fluctuations in demand. This is particularly important in industries where demand can be unpredictable or seasonal. By keeping a buffer of safety stock, a company can ensure that it has enough inventory on hand to meet customer demand even if actual sales exceed forecasted amounts or if there are delays in restocking from suppliers.

The other options do not accurately represent the benefits associated with safety stock. For instance, safety stock does not reduce production costs; rather, it may incur carrying costs or tie up capital. It also does not eliminate the need for inventory, as safety stock is a part of overall inventory management strategies. Lastly, safety stock does not increase supplier lead times; instead, it is designed to provide a buffer against lead time variability. Thus, the benefit of preventing stockouts during fluctuations in demand is the most accurate representation of safety stock's purpose.