Which of the following best defines safety stock?

Safety stock is best defined as additional inventory held to mitigate the risk of stockouts. This inventory acts as a buffer against uncertainties in demand and supply. For instance, if there are unexpected spikes in customer orders or delays in supply shipments, safety stock ensures that a company can continue to fulfill customer needs without interruptions.

Organizations frequently use safety stock to manage the variability in demand and lead times. By maintaining this additional inventory, companies can avoid potential lost sales and customer dissatisfaction that could arise from stockouts. It is a critical component of inventory management strategies, especially for businesses operating in environments where demand can be unpredictable.

In contrast, other options describe different inventory types or purposes unrelated to the primary function of safety stock. Inventory maintained to satisfy customer orders refers to regular stock levels, while inventory planned for special promotions targets specific marketing strategies. Stock reserved for return orders addresses returns processing instead of managing ongoing demand and supply uncertainties. Therefore, the definition that most accurately encompasses the essence of safety stock is that it serves as a safeguard against potential stockouts.