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# Safety Stock

## Definition

Inventory held in excess of expected demand to buffer against supply and
demand uncertainty. Safety stock represents capital deliberately kept
unproductive — not expected to be consumed in normal operations — in order
to preserve operational continuity when actual demand or supply deviates
from forecast. The optimal safety stock level balances inventory holding
cost against stockout cost.

## Source

Capital and Inventory in Supply Chain Management, §Safety Stock and Reserve
Capacity

## Supply Chain Domain

Capital Management

## VSM Assignment

S3 — Safety stock is a management-level capital allocation decision. The
question of how much safety stock to hold is a resource management choice
that trades off capital efficiency against operational resilience, made at
the S3 (management/control) level.

## WoN Concept

Accumulation of Stock — Smith describes the accumulation of stock as a
prerequisite for productive activity: you cannot employ workers until you
have stock to sustain them. Safety stock is a modern instantiation of this
logic — productive continuity requires a buffer of stock to absorb
variability, just as Smith's pre-capitalist household needed a reserve before
it could specialise its labour. Both represent capital held in reserve against
contingency rather than deployed in production.
