Safety stock is
A)the cost of holding inventory.
B)a non-value activity and should never be considered.
C)not considered when calculating the reorder point.
D)extra inventory carried to serve as insurance against fluctuations in demand.

Question

Quizplus · Accepted Answer

Safety stock is the extra inventory that is carried to serve as insurance against fluctuations in demand. It helps to ensure that there are enough stocks available to meet customer demand even during periods of unexpected demand variation or supply chain disruptions. The cost of holding inventory is not equivalent to safety stock, although it is a consideration in deciding how much safety stock to hold. Safety stock is also taken into consideration when calculating the reorder point. Therefore, option A, B, and C are not correct.

Safety Stock Is