Which type of inventory is held to guard against stockouts caused by demand variability and lead-time uncertainty?

• A. Cycle stock
• B. Safety stock
• C. Decoupling inventory
• D. Pipeline inventory

Answer: (B)

The idea being tested is using a buffer of inventory to absorb unpredictability in demand and replenishment timing. This extra stock is held specifically to prevent stockouts when actual demand or lead times differ from what was planned, so service levels stay higher even under variability. The amount of safety stock is tied to how much demand and lead-time can vary and what service level you want to achieve, often considering the variability during the lead time.

Cycle stock, by contrast, is the regular quantity needed to meet anticipated demand within a normal replenishment cycle, not a buffer for uncertainty. Decoupling inventory serves to keep different parts of a process running independently and can include buffers, but its primary purpose isn’t to protect against demand and lead-time variability. Pipeline inventory is inventory already in transit, not stock kept on hand to cover fluctuations.

So the buffer designed specifically to guard against stockouts from demand variability and lead-time uncertainty is safety stock.