39 lines
1.5 KiB
Markdown
39 lines
1.5 KiB
Markdown
|
<!-- generated: provider=openrouter model=arcee-ai/trinity-large-preview:free date=2026-02-22 source=capital-and-inventory -->
|
||
|
|
|
||
|
|
# 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.
|