Free tool
Safety stock calculator
Safety stock is the extra inventory you hold to cover demand spikes and late deliveries. Size it with Z times the standard deviation of daily demand times the square root of lead time. With a Z of 1.65, demand varying by 4 units a day, and a 14 day lead time, that is 25 units.
Safety stock calculator
How to use it
- Measure how much daily demand varies. Take daily units sold over a recent window and compute the standard deviation. A spreadsheet does this with STDEV. The bigger the swing between quiet and busy days, the bigger the number.
- Enter your supplier lead time. Lead time is how many days pass between placing an order and receiving it. The formula takes its square root, so doubling the lead time raises the buffer by about 41%, not by 100%.
- Pick a service level. The service level is how often you want to get through a replenishment cycle without a stockout. 95% is a common starting point and gives a Z of 1.65. Aiming higher costs more stock.
- Read the buffer and fold it into your reorder point. The calculator multiplies the three together and rounds up. Add that number to the units you expect to sell during the lead time, and you have a reorder point that allows for a bad week.
Every term used here is defined in the inventory planning glossary, and the arithmetic behind all of it is worked through on how inventory forecasting works.
Questions merchants ask
What is the safety stock formula?
The common form is safety stock equals Z multiplied by the standard deviation of daily demand multiplied by the square root of lead time in days. It assumes lead time is constant and demand is what varies, which is the usual case for a store buying from an established supplier.
Why does the formula use the square root of lead time?
Because independent daily variations partly cancel each other out over a longer window. Ten days of demand is not ten times as unpredictable as one day, it is about the square root of ten times as unpredictable. Using lead time directly would leave you holding far more buffer than you need.
What service level should I choose?
It is a cost decision, not a technical one. 90% means Z = 1.28 and a smaller buffer. 99% means Z = 2.33 and roughly twice the stock of 90%. High-margin products and products customers will not wait for justify a higher level. Slow, low-margin lines usually do not.
Why is average daily demand not in the formula?
Because safety stock covers variability, not volume. The units you expect to sell during the lead time are handled by the reorder point's first term. A product selling 1000 a day at a perfectly steady rate needs almost no buffer. A product selling 10 a day with wild swings needs plenty.
Buffers sized per product, not by rule of thumb
Replinish measures how much each product's sales actually vary and sizes its buffer from that, then rolls it into a reorder point and a draft purchase order.
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