Extra inventory maintained above normal stock levels to protect against uncertainties in supply and demand, preventing costly stockouts and service disruptions. This buffer inventory acts as insurance against variability in lead times, supplier delays, demand spikes, or forecast inaccuracies that could otherwise leave warehouses unable to fulfill customer orders.
Safety stock levels are typically calculated using statistical models that consider demand variability, lead time fluctuations, and desired service levels. For example, a warehouse supplying seasonal products might maintain higher safety stock before peak seasons, while fast-moving consumer goods may require consistent buffer levels year-round.
Effective safety stock management balances customer service objectives with inventory carrying costs. Too little safety stock risks stockouts and lost sales, while excessive levels tie up working capital and warehouse space. Modern WMS platforms help optimize these levels through demand forecasting, automated reorder points, and real-time inventory tracking to maintain the right balance for each product.
