Podcast
Questions and Answers
How can buffer stocks help prevent stockouts?
What additional resources are required when implementing a buffer stock strategy?
What is the purpose of a buffer stock in supply chain management?
How does buffer stock help companies manage risk in the supply chain?
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What is one drawback of using buffer stocks in supply chain management?
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Study Notes
A buffer stock is part of the strategy used in supply chain management to balance demand and supply by maintaining a surplus inventory. Essentially, it’s extra goods purchased with the purpose of selling them when there's high demand and low availability from suppliers. Buffer stocks can help prevent stockouts if a supplier experiences delays. This type of strategy can also reduce costs because of bulk discounts and offer insurance against price increases. However, they require additional resources like storage space and staffing along with increased expenses for carrying costs and potential obsolescence expenses. In terms of risk reduction, buffer stock helps companies avoid losing sales due to shortages and major disruptions. For example, during holidays, supermarkets often buy more chocolate to ensure a steady flow of sale despite increasing customer demand. Overall, buffer stock serves as a strategic tool to manage inventory levels effectively in today's highly competitive marketplace.
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Description
Explore how buffer stocks are utilized in supply chain management to balance demand and supply, prevent stockouts, reduce costs, and manage risks effectively. Learn about the benefits and challenges of maintaining surplus inventory as a strategic tool in today's competitive marketplace.
