Safety stock is inventory that a business holds to mitigate the risk of shortages or stockouts. Think of it as a type of insurance for when demand spikes or there’s a material shortage. Businesses can use a safety stock formula to make data-driven decisions about managing inventory levels to maximize profits.
Coming up, we’ll explain how to perform a safety stock calculation and how you can use it to lower your stockout rates. We’ll also explore four additional types of stock that will help you fill the gaps in your inventory accounting. They are simple ways of making sure you stay on top of business amidst the chaos of growth and complexity. These four types of stocks stand out amongst other inventory classifications and types you can use to lower inventory costs.