Safety Stock Calculator

Average daily demand

Daily demand deviation

Lead time, days

Lead time deviation, days

Service level, %

Result

Safety stock346
Reorder point1,046
Demand over the lead time700
Service level factor1.645
Days the buffer covers3.5
What mattersService level is expensive: going from 95 to 99 percent raises the safety stock by about half again, and removing the last percent of stockouts takes roughly double.

You are not buffering demand, you are buffering surprises

Calculates safety stock and the reorder point from demand variability, lead time variability and the service level you want.

Ordinary stock covers the demand you expect during the lead time. Safety stock covers everything you did not expect: a week where sales double, or a supplier who arrives four days late.

Both sources of variation add in quadrature — the square root of the sum of the squares — which is why halving one of them helps far less than it feels like it should.

What this calculator shows

The safety stock and the reorder point
The demand consumed over the lead time
The service level factor and how many days the buffer covers

What to keep in mind

Demand and lead time are treated as normally distributed and independent of each other.
The service level is the probability of not running out during one replenishment cycle, not over the whole year.

FAQs

What service level should I use?

Ninety to ninety-five percent for ordinary goods. Ninety-nine is for items whose absence stops a line or loses a customer, because the stock it needs is much larger.

Why does 99 percent cost so much more?

The factor goes from 1.65 to 2.33 — about forty percent more stock for four percentage points of service. The last fraction of a percent is the most expensive stock you own.

What if the lead time is completely reliable?

Set its deviation to zero and only the demand variation remains. In the example that alone cuts the safety stock by more than two thirds.

What is the reorder point?

The level at which the next order has to be placed: demand over the lead time plus the safety stock. Below it, the buffer is what you are living on.

Worked example

A hundred units a day

Input: 100 a day ± 25, a 7-day lead time ± 2 days, 95 percent service

Output: a safety stock of 346 and a reorder point of 1,046

Note: The lead-time variation dominates: two days of uncertainty on a hundred a day contributes far more than the daily swing. Tightening delivery times beats forecasting better.

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Safety Stock Calculator

Result

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