In your everyday business, in your everyday production you no doubt understand the need for certain levels of stock. You’ve got your orders coming in and as they come, you can see what you need more often and what’s left standing for a longer period than you’d expect. Those moving positions are what you need to keep up and make sure your positions meet the demand.  

It’s not just maintaining the end-products if you’re producing, but also keeping the stock levels on a defined level for materials the product is made from. Especially crucial are those materials with longer shipment periods and probabilities for delivery difficulties.

The term ‘safety stock’ is driven from the concept of maintaining your business by ensuring that the standing stock of your most attractive products is just about exceeding their demand. I say ‘just about’ since it shouldn’t be considerably higher either for then you’d run into the risk of obsolete stock at some point. So it’s about finding the ‘safe’ levels that you need to meet orders and that you’re able to sell in foreseeable future.