Which form of inventory is built up as a hedge against potential future events that could disrupt operations?

• A. Fluctuation inventory
• B. Hedge inventory
• C. Hedge stock
• D. Safety stock

Answer: (B)

Hedge inventory is a buffer kept specifically to protect the operation from potential future disruptions. The idea is to hold extra stock so you can continue production if a disruption occurs—such as a supplier going down, a price spike, or a transportation delay—before normal flows resume. This is different from safety stock, which is mainly about absorbing variability in demand and lead times within expected operations. Hedge inventory targets risks that could halt or significantly slow production, rather than just fluctuations in normal demand, making it the appropriate choice for guarding against disruptive events.