Certified Supply Chain Professional (CSCP) Practice Exam

What type of inventory is stocked to ensure the company can respond to sudden increases in demand?

1. Safety stock

2. Buffer inventory

3. Cycle stock

4. Anticipation inventory

The correct answer is: Safety stock

Safety stock is an additional quantity of inventory kept on hand to prevent stockouts resulting from fluctuations in demand or supply chain disruptions. This type of inventory acts as a buffer against uncertainties in market demand, allowing a company to respond rapidly to sudden spikes in consumer orders or unexpected supply chain delays. By maintaining safety stock, a business can fulfill customer orders despite variation in lead times or demand levels, thus enhancing customer satisfaction and maintaining service levels. In contrast, buffer inventory typically refers to inventory kept to smooth out production processes or manage throughput in manufacturing and may not be specifically linked to demand variability. Cycle stock is the portion of inventory that is replenished regularly through routine ordering and is based on predictable demand patterns. Anticipation inventory is stocked in advance of expected demand increases, such as seasonal peaks, rather than as a response to random fluctuations. Therefore, safety stock is the most appropriate term for inventory held to mitigate unexpected demand increases.