What term is used for the average inventory to satisfy demand between supplier shipments?

Cycle inventory refers to the average amount of inventory that a company holds to meet customer demand between replenishment cycles from suppliers. This type of inventory is typically established based on the order quantity and the demand rate, reflecting the regular replenishment process. When shipments are received from suppliers, there is usually a period where the inventory is utilized to fulfill customer orders; the average of this inventory during that time is known as cycle inventory.

Maintaining cycle inventory is crucial for ensuring efficient operations, as it helps balance the costs associated with holding inventory and the service level required to meet customer demand. Businesses determine their cycle inventory levels based on forecasted sales and replenishment lead times, allowing them to effectively manage their supply chain without carrying excessive stock.

Other terms in the question relate to different concepts within inventory management. Safety stock is intended to safeguard against variability in demand or supply; buffer inventory serves a similar purpose by providing additional stock to mitigate risks of stockouts; and reorder point is the inventory level at which new orders should be placed to replenish stock before it runs out. While all these concepts are important, cycle inventory specifically concerns the regular flow and averaging of inventory in response to planned supply and demand cycles.