Business – 4.2 Inventory management – Managing inventory | e-Consult
4.2 Inventory management – Managing inventory (1 questions)
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Buffer inventory protects against uncertainties in demand and supply, allowing production to continue when actual demand exceeds forecasts or when deliveries of inputs are delayed.
Two key factors that influence the size of buffer inventory are:
- Demand variability: Greater fluctuations in customer orders require a larger safety stock.
- Lead‑time variability: Greater uncertainty in the time taken for suppliers to deliver components also increases the required buffer.