What term describes a unit of inventory kept as a buffer against uncertainties in supply or demand?

The term that describes a unit of inventory kept as a buffer against uncertainties in supply or demand is known as safety stock. Safety stock serves as an important risk management tool that helps businesses mitigate potential stockouts that can occur due to unexpected changes in demand or delays in supply.

By maintaining a safety stock, a company can ensure that it has enough inventory to meet customer orders even when there are fluctuations in demand or disruptions in the supply chain. This practice is particularly critical in industries where demand can be unpredictable or where suppliers may have lead times that fluctuate substantially.

In contrast, concepts such as lead time, reorder point, and cycle stock serve different purposes in inventory management. Lead time refers to the time it takes from placing an order until it is received, while the reorder point refers to the inventory level at which a new order should be placed to replenish stock before it runs out. Cycle stock, on the other hand, is the inventory that is sold and replenished frequently, representing the regular inventory needed for day-to-day operations, as opposed to the buffer provided by safety stock.