Which statement correctly lists the three levels of internal inventory?

• A. Safety stock, pipeline stock, and obsolete stock
• B. Cycle stock, safety stock, and strategic stock
• C. Cycle stock, safety stock, and pipeline stock
• D. Cycle stock, safety stock, and obsolete stock

Answer: (B)

Understanding how inventory is organized inside the system helps explain how a company guards service levels while controlling costs. The first level is cycle stock, the quantity used to meet normal demand during a replenishment cycle; this stock is regularly turned over as orders are filled. The second level is safety stock, extra above cycle stock kept precisely to absorb demand variability and potential delays in supply, so stockouts don’t happen when things don’t go as planned. The third level is strategic stock, stock kept for longer-term purposes tied to strategic goals—things like securing supply during anticipated constraints, benefiting from price trends, or ensuring availability for critical initiatives. Together, cycle stock, safety stock, and strategic stock capture how a firm manages everyday operations, buffers against uncertainty, and eyes long-horizon needs. Inventory in transit between locations (pipeline stock) or obsolete stock aren’t described by this three-level internal framework, so they’re treated separately in inventory planning.