Buffer stocks advantages and disadvantages
Uncertainty of demand and lead –time necessitate building of safety stock. These are also called as “buffer stocks”. Larger the uncertainty of demand and supply; the larger will have to be the amount of buffer stock. Inventories protect him against unforeseen failures in supply or increase in demand. Keeping too much safety stock will increase the holding costs of a company, for instance, inventory storage, spoilage, interest expense, and obsolescence costs. It is important to keep only a limited supply of safety stock based on your estimations of the previous years and prediction for the current year. A structured note is a debt security issued by financial institutions. Discover how come structured notes might not be the best option for an investor.