A tool employed in inventory management helps determine the extra quantity of goods a business should hold to mitigate the risk of stockouts caused by unforeseen fluctuations in demand or supply chain disruptions. For example, a retailer expecting to sell 100 units of a product weekly might maintain an additional 20 units as a buffer against unexpectedly high sales or delayed deliveries.
Maintaining an appropriate buffer level plays a crucial role in ensuring business continuity and customer satisfaction. Historically, determining this buffer relied on rudimentary methods and educated guesses. Modern computational tools provide more accurate and dynamic adjustments based on real-time data, leading to improved efficiency and reduced carrying costs. These advancements represent a significant shift from static buffer levels to dynamic adjustments that respond to market volatility and supply chain complexities.
