Just in Case/Buffer Stocks (Pros & Cons)

• Recession of buffer stocks

  Buffer stock level, sometimes called just in case, is basically the minimum stock a business intends to hold
• Pros of buffer stocks

  • Effectively managing uncertainty
  • Negotiating a better deal with suppliers
• Pros of buffer stocks

  • Effectively managing uncertainty by holding a minimum stock to continue production in case of supplier failures or unexpected demand
  • Negotiating a better deal with suppliers by making larger volume orders and benefiting from purchasing economies of scale
• Cons of buffer stocks

  • Higher storage costs
  • Possible wastage
• Cons of buffer stocks

  • Higher storage costs leading to lower cash flow
  • Possible wastage depending on the type of stock held, especially if it can become obsolete