Define the term 'buffer inventory'.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] The minimum/safety inventory level that should be held to ensure that production can take place should delivery of supplies be delayed / or production rates need to increase.
2. [1] Cost implications – storage costs, inventory handling costs, damaged/obsolescence, opportunity costs of capital tied up in stock (too high inventory levels).
3. [1] Insufficient inventories to meet changes in demand – lost sales.
4. [1] Out-of-date inventories – non-rotation - leads to losses - food - fast changing technology products.
5. [1] Late deliveries
6. [1] Low discounts from suppliers
7. [1] Idle production – resources if inventory supplies run out.
8. [1] Excess finished goods – may need to reduce prices.