Buffer stock value

Buffer stock, or buffer inventory, is that which is kept on-hand in excess of forecast demand. When used strategically, for example when an interruption of the supply chain is a concern, maintaining buffer stock is prudent to minimize stock-outs and ensure consistent supply to customers. However, as a constant strategy, maintaining a buffer stock can be an expensive and unnecessary plan.

One of the most important best practices of recent years is what's known as just-in-time (JIT) inventory management, which term should be intuitive. JIT minimizes the expense of housing inventory by maximizing the very efficient supply chain of the 21st century global marketplace. The opposite of JIT is just-in-case inventory, which is another term for maintaining buffer stock.

For small businesses, where all capital is precious, any buffer stock can only be justified for those units that have rapid turns or when a future supply interruption is a concern.