If lead time increases, what is the likely effect on buffer stock levels?

• A. Increase
• B. Decrease
• C. Remain the same
• D. Cannot be determined

Answer: (A)

Longer lead times increase the risk of stockouts during the replenishment window, so buffer stock should increase. Buffer stock is the extra inventory kept to guard against how much demand might exceed supply during the period it takes to receive a new order. If the time between placing an order and receiving it grows, you face a longer period in which demand could outpace supply, and the variability in that demand compounds. To maintain the same service level and avoid stockouts, you raise the safety stock accordingly. For example, if a supplier’s lead time doubles, you generally need more safety stock to cover that longer interval.