Certified Management Accountant 2026 – 400 Free Practice Questions to Pass the Exam

Safety stock plays a critical role in inventory management by serving as a buffer against uncertainties in demand and supply. Specifically, it helps to mitigate stockouts that can occur due to variability in lead times. Lead time is the duration between placing an order and receiving the items. Fluctuations in this period—due to factors like supplier delays or unexpected demand spikes—can lead to situations where the available inventory is insufficient to meet customer orders.

By maintaining safety stock, businesses can ensure that they have enough inventory to cover unexpected increases in demand or longer-than-anticipated lead times, thereby reducing the risk of stockouts. This approach helps to maintain customer satisfaction by ensuring product availability and enabling smoother operations in the supply chain.

In contrast, excess inventory costs are associated with holding too much inventory, which safety stock is designed to avoid. Order fulfillment errors relate more to the accuracy of processing orders rather than stock levels, and while price fluctuations in raw materials can affect purchasing costs, they do not directly relate to inventory levels managed through safety stock.