Safety Stock Calculator
Calculate the buffer inventory needed to protect against uncertainty in demand and supply.
Safety Stock Analysis
Understanding Safety Stock
Safety stock is the extra inventory you keep on hand as a buffer against uncertainty. It protects your business from stockouts when demand spikes or deliveries are delayed.
What is Safety Stock?
Safety stock is not your minimum inventory level - it's the cushion below your normal working inventory. You ideally never dip into it, but it's there to protect you when things don't go according to plan.
Why Safety Stock Matters
- Avoid Stockouts: Prevent lost sales when demand unexpectedly increases
- Buffer Against Delays: Protect against supplier delivery problems
- Maintain Service Levels: Keep customers happy with consistent availability
- Seasonal Variations: Handle demand fluctuations during peak periods
- Supplier Reliability: Account for variable lead times
The Formula Explained
The safety stock formula accounts for the worst-case scenario (highest demand during the longest delivery time) minus your normal expected usage:
- Worst-Case Scenario: Maximum daily usage × Maximum lead time
- Normal Scenario: Average daily usage × Average lead time
- Safety Buffer: The difference between these two scenarios
Example Scenario
Online Retailer:
- Average daily sales: 10 units
- Maximum daily sales: 25 units (during promotions)
- Average lead time: 14 days
- Maximum lead time: 21 days (delays during holidays)
- Safety Stock: (25 × 21) - (10 × 14) = 525 - 140 = 385 units
Optimizing Your Safety Stock
- Track Historical Data: Use actual sales data to determine realistic maximum daily usage
- Monitor Lead Times: Keep records of supplier delivery performance
- Adjust Seasonally: Increase safety stock before known peak periods
- Balance Costs: More safety stock = less stockout risk but higher holding costs
- Review Regularly: Update your safety stock calculations quarterly or when business conditions change
Next Step: Reorder Point
Once you know your safety stock, use the Reorder Point Calculator to determine when to place orders. Your reorder point includes your safety stock plus the inventory you'll use during the normal lead time.