What is Base Stock?

Base stock is the amount of inventory that a business needs to keep on hand in order to fulfill customer orders with a delay no greater than expected by customers. If inventory levels drop below the base stock level, reordering delays will likely result in the loss of customers.

The base stock level can vary substantially due to the effects of seasonality and changes in customer tastes, fashion trends, and so forth. Consequently, it is essential to periodically review your established base stock levels to see if they need to be altered. Otherwise, you will likely experience periods of excess investment in inventory, as well as periods during which excess demand results in stock-out conditions.