1. What is Safety Stock?

Definition: Safety stock is the extra inventory kept to prevent stockouts caused by uncertainties in demand and supply chain.

Purpose: It acts as a buffer against variability in demand and supply lead times, ensuring service level targets are met.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( Z \) — Z-score corresponding to desired service level (unitless)
• \( \sigma_d \) — Standard deviation of demand (units)
• \( LT \) — Lead time (days)

Explanation: The formula accounts for demand variability and lead time uncertainty to determine the appropriate buffer stock.

3. Importance of Safety Stock

Details: Proper safety stock calculation helps maintain customer satisfaction, prevents lost sales, and provides supply chain resilience.

4. Using the Calculator

Tips:

• Z-score: 1.65 (95% service level), 1.28 (90%), 2.33 (99%)
• Standard deviation: Calculate from historical demand data
• Lead time: Average supplier delivery time in days

5. Frequently Asked Questions (FAQ)

Q1: How do I determine the right Z-score?
A: Choose based on your desired service level percentage. Higher service levels require higher Z-scores.

Q2: What if my lead time varies?
A: Use the average lead time or consider adding lead time variability to the formula.

Q3: How often should I recalculate safety stock?
A: Review quarterly or whenever demand patterns or supply lead times change significantly.

Q4: Does this work for all products?
A: Best for products with stable demand patterns. For erratic demand, consider alternative methods.

Q5: Should safety stock be the same for all items?
A: No, high-value or critical items typically require higher safety stock levels.