CPIM Practice Exam

What does safety stock help mitigate in inventory management?

1. Seasonal demand fluctuations

2. Supplier lead time variability

3. Unforeseen increases in demand

4. All of the above

The correct answer is: All of the above

Safety stock serves as a buffer in inventory management to address various uncertainties that can impact supply chain performance. It is particularly useful for managing risks associated with demand and supply fluctuations. When it comes to seasonal demand fluctuations, safety stock can help ensure that a business has enough inventory to meet increased demand during peak seasons without running out of stock. This is crucial for maintaining customer satisfaction and sales performance during high-demand periods. Supplier lead time variability can also pose a challenge; when there are unexpected delays in receiving orders from suppliers, safety stock provides a safeguard to prevent stockouts. It ensures that there is enough inventory on hand while waiting for the replenishment shipments. Unforeseen increases in demand, such as during promotions or unexpected market changes, can disrupt planned inventory levels. Safety stock allows businesses to capitalize on these opportunities without facing the risk of not having enough product available for customers. By helping to mitigate the challenges associated with seasonal variations, lead time variability, and sudden demand increases, safety stock plays a vital role in maintaining inventory flow and operational efficiency in a dynamic market environment. Therefore, safety stock is beneficial for addressing all of these factors.