What is Safety Stock in inventory management?

Safety stock is defined as extra inventory that is maintained to prevent stockouts during unexpected increases in demand or delays in supply. It acts as a buffer against uncertainties in the supply chain, such as sudden spikes in customer demand or unforeseen interruptions in the supply process. By holding safety stock, a company ensures that it can continue to meet customer orders even when these unexpected conditions arise.

This concept is crucial for maintaining customer satisfaction and operational efficiency, as running out of stock can lead to lost sales and damage to the brand's reputation. The calculation of safety stock often involves analyzing historical sales data, lead times, and service level requirements to determine an appropriate buffer level.

The other options do not align with the definition of safety stock. For example, inventory that is always on display relates more to sales strategies and merchandising rather than stock management. Inventory set aside for special orders or future promotions serves different specific purposes in inventory handling and does not touch upon the risk management aspect that safety stock embodies.