Glossary · Planning
What is Safety stock?
Safety stock is extra inventory held to cover unexpected demand or late supplier deliveries, so a stockout is less likely before the next order arrives.
It is the buffer between what you expect to sell during the lead time and what you might sell if demand spikes or the delivery is late. A bigger buffer means fewer stockouts and more cash tied up in stock.
The right size depends on how variable demand and lead time are, and on the service level you choose. It is set per product, not for the whole catalogue.
Formula
Safety stock = z × √( lead time × σ² of daily demand + daily demand² × σ² of lead time )
Example
At 95% service (z ≈ 1.64), daily demand of 20 with a standard deviation of 8, and a 21-day lead time that varies by 4 days, safety stock is about 145 units.
How Stokrio handles it
Stokrio calculates safety stock per product from forecast error and the supplier lead times measured on received purchase orders, and feeds it into the reorder point.
Calculate it
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