Buffer Stock
Spare inventory held to buffer against demand variations/supply disruptions.
Formula
Buffer Stock = Reorder Level − Minimum Stock Level
Real World
Supermarkets like Tesco hold buffer stocks of tinned goods; during the 2020 pandemic panic-buying surge, stores with higher buffers avoided empty shelves longer than those running lean inventories.
Exam Focus
Link buffer stock to holding costs vs. stockout risk — 'analyse' questions expect both sides of this trade-off.
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