Safety stock is inventory held as a buffer against uncertainty in demand, replenishment timing or supply.
How it works in retail
It sits above the stock expected to cover normal requirements. The appropriate quantity depends on variability, service objectives and the consequences of running out.
A retail example
A retailer keeps an additional quantity of a bestselling basic to cover occasional delays in replenishment.
What to keep in mind
More buffer stock ties up cash and storage space. It cannot compensate indefinitely for inaccurate forecasts or unreliable supply.
Examples are illustrative. Terminology and measurement conventions can vary by business and market.