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Stock, Buffer


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

Courtesy of


 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




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