Which scenario best illustrates the purpose of safety stock?

• A. Holding extra inventory to cover supplier delays
• B. Reducing order quantities to minimum
• C. Freezing stock for audit
• D. Using extra inventory to cover variability in demand or supply

Answer: (D)

Safety stock serves as a cushion against uncertainty in both demand and supply. It’s meant to prevent stockouts when actual demand turns out higher than forecasted or when lead times stretch due to supplier issues. The scenario that best shows this purpose is using extra inventory to cover variability in both demand and supply, because it explicitly accounts for unpredictable changes on either side and keeps service levels steady.

Holding extra inventory to cover supplier delays is related, but it focuses on a specific risk—delays from suppliers—not the broader idea of buffering against variability in any direction. Freezing stock for audits isn’t about preventing stockouts, it’s about compliance and record-keeping. Reducing order quantities to a minimum reduces inventory levels and can actually raise the risk of stockouts, contrary to the protective aim of safety stock.