What is the primary purpose of safety stock?

• A. To maximize total inventory cost.
• B. To eliminate all stockouts guaranteed.
• C. To protect against uncertainty in demand or supply during lead time.
• D. To shorten lead times.

Answer: (C)

The primary purpose of safety stock is to protect against uncertainty in demand or supply during the replenishment lead time. By keeping extra inventory on hand, you create a buffer so that if actual demand turns out higher than forecast or if supplier lead times are longer than expected, you’re less likely to run out before new stock arrives. This helps maintain the desired service level and customer availability. It’s not about maximizing costs, guaranteeing zero stockouts, or shortening lead times—safety stock reduces risk and mitigates variability, at the cost of higher carrying inventory.