Safety stock is the number of an item that should be kept in inventory to avoid running out of stock.
Safety Stock = (Max Daily Usage in Units x Max Lead Time in Days) – (Average Daily Usage in Units x Average Lead Time in Days)
An item has a maximum daily usage of 15 units and a maximum lead time of 23 days. It also has an average daily usage of 7 units and an average lead time of 10 days.
Safety Stock = (15 x 23) – (7 x 10) = 345 – 70 = 275
Therefore, the safety stock level is 275 units.
- Trade Gecko – Determining your safety stock level – The formula we’re using for this safety stock calculator.
- Wikipedia – Safety Stock – Entry on how safety stock is used in logistics.
- SKU Vault – How to use the safety stock formula: a step-by-step guide – A description of how to calculate safety stock for a company.