Safety stock
Safety stock is extra inventory held above expected demand to protect against running out when demand spikes or a supplier delivers late. It is the buffer built into the reorder point: you reorder while safety stock is still on the shelf, so normal variability doesn't turn into a stockout.
Safety stock formulas
The basic formula uses your worst recent case: safety stock = (maximum daily sales × maximum lead time) - (average daily sales × average lead time). Say a SKU sells 40 units on an average day and 60 on a busy one, and the supplier usually takes 10 days but has taken 14. Safety stock = (60 × 14) - (40 × 10) = 840 - 400 = 440 units.
The statistical formula sizes the buffer to a service level: safety stock = Z × σ × √L, where σ is the standard deviation of daily demand, L is the lead time in days, and Z is the service-level factor. With σ = 12 units, L = 9 days and a 95% target (Z ≈ 1.65), safety stock = 1.65 × 12 × 3 ≈ 60 units. The safety stock calculator uses the statistical method and also accounts for variation in lead time.
Choosing a service level
The service level is the share of replenishment cycles you expect to get through without a stockout. Each step up costs more stock for a smaller gain.
- 90% service level: Z ≈ 1.28.
- 95% service level: Z ≈ 1.65.
- 98% service level: Z ≈ 2.05.
- 99% service level: Z ≈ 2.33.
- Use higher targets for items that stop an order or a customer relationship, and lower ones for slow, substitutable items.
Safety stock vs reorder point
Safety stock is part of the reorder point, not a separate trigger. The reorder point is lead-time demand plus safety stock. In a normal cycle, you reorder at that level, sell through the lead-time demand while waiting, and the delivery arrives with safety stock untouched. Safety stock only gets used when demand runs hot or the delivery runs late.
Common safety stock mistakes
Safety stock is often set once and forgotten.
- Using one rule, such as "two weeks of stock", for every SKU regardless of variability.
- Ignoring lead time variability, which often matters more than demand variability for imported goods.
- Never recalculating after a season, a promotion or a supplier change.
- Counting expired, damaged or held stock as part of the buffer.
How NextStock helps with safety stock
NextStock doesn't calculate a statistical safety stock for you. Its supplier catalog records lead times, pack sizes and minimum order quantities, and its replenishment suggestions look at demand and days of cover to propose purchases and transfers. You set the buffer policy; purchasing and replenishment helps you act on it.
Part of the NextStock warehouse glossary. Browse the full glossary