Safety stock provides a "cushion" in inventory to address the uncertainty in a customer's demand. It is important to maintain the "right" amount of safety stock. If it is too low, we may not be able to fulfill a customers' orders in a timely fashion. On the other hand, safety stock that is too high incurs significant financial and/or logistics burden to the business.
The calculation of safety stock is based on a number of factors include historical customer demands, product lead time and fill rate (a.k.a., demand satisfaction). The team at safetystockcalc.com builds a website and describe a popular approach to calculate safety stock using an example. On the website, you may also find two free tools that are useful, an online calculator and a downloadable spreadsheet with all the formulas. Enjoy!
Online Safety Stock Calculator Screenshot
Spreadsheet Safety Stock Calculator Screenshot
