What is the difference between Reserve stock and Buffer stock?

• A. Both A and B
• B. Reserve stock for emergencies
• C. Buffer stock cushions demand variability
• D. They are the same

Answer: (B)

The difference centers on purpose. Reserve stock is kept specifically to cover emergencies or unexpected disruptions in supply, ensuring operations can continue even when normal procurement is interrupted. Buffer stock, on the other hand, is maintained to smooth out variability in demand or delivery lead times during normal operations, preventing stockouts from forecast errors or delays. So the statement that Reserve stock is for emergencies best captures the distinct role that reserve stock plays, whereas buffer stock is about cushioning fluctuations. For example, a reserve stock might be set aside to handle a supplier shutdown, while buffer stock would absorb a sudden surge in demand or a temporary delay in replenishment. They serve related goals (avoiding stockouts) but in different situations, which is why reserve stock for emergencies correctly describes the difference.