Also known as safety stock, buffer stock represents a contingency against variation in demand and/or supply. As an example, if a buyer is importing spare parts from overseas and the lead time varies between four and eight weeks, it would not be prudent to set stock levels based on holding a maximum of six weeks stock (being the average lead time). Factors influencing the quantity of buffer stock typically include the variability of demand, the lead-time, the desired service level to the customer and the organisation’s risk tolerance. For example, if the organisation set a target service level of 98%, the average lead time was 42 days and monthly demand varied between 20 and 25 units, then the buffer stock would be about 14 units, or about two weeks stock. See also Stock.« Back to Glossary Index
Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.