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Forums › ACCA Forums › ACCA MA Management Accounting Forums › Could anyone please explain this to me?
What is buffer stock? I do not get the meaning of this due my lecturer’s poor explanation.
This could vary slightly depending on context but the basic idea in terms of inventory control is that the buffer provides an additional level of safety in terms of avoiding running out of inventory.If for example demand during a period is higher than expected and/or if the lead time between making an order for inventory and delivery time is longer than expected.
Buffer stock is the minimum inventory level.
Minimum inventory level = re-order level – (average demand x average lead time)