Q11) is a cushion between supply and
demand
Answers
Answer:
When it comes to supply and demand, there are different types of inventory that business owners and managers need to know.This type of inventory cushion is called safety stock (or buffer inventory).
SAFETY STOCK IS A CUSHION BETWEEN SUPPLY AND DEMAND.
Explanation: A safety stock item is an additional quantity of a product that is kept in the warehouse to avoid running out of stock. It acts as a buffer against demand changes.
Moreover having a safety stock on hand protects the economy from unexpected demand spikes and erroneous market estimates that can occur during busy or festive seasons.
It acts as a buffer for ordered products take longer than expected to arrive at the warehouse. It keeps the company from running out of popular items and allows it to consistently fulfil requests.
Market changes can cause the price of the items to rise unexpectedly. This could be the result of a sudden lack of raw materials, an increase in raw material prices, unexpected market demand increases, new competitors, or new government laws.
If a person has enough safety stock on hand during these unforeseen circumstances, he has the capability to avoid the costs of purchasing stock at higher prices without jeopardizing sales.