What is the term for inventory held to counter uncertainty in demand?

The term for inventory held to counter uncertainty in demand is safety inventory. This type of inventory acts as a buffer against unpredictable fluctuations in customer demand and potential supply chain disruptions. Companies maintain safety inventory to ensure that they can meet customer orders without delays, even when demand exceeds the forecasted levels due to variability in purchasing patterns.

Safety inventory is a crucial component of effective supply chain management, as it helps maintain service levels and avoid stockouts, which can lead to lost sales and dissatisfied customers. This strategic approach is particularly important in industries with high variability in demand or lead times, where having an adequate safety stock can significantly impact overall operational efficiency and customer satisfaction.

Cycle inventory, on the other hand, refers to the portion of inventory that is ordered and replenished regularly to meet expected demand. Seasonal inventory is associated with demand patterns that vary across different times of the year, while transportation inventory is held during the process of transporting goods. None of these terms encompass the idea of managing uncertainty in demand as effectively as safety inventory does.