How to calculate safety stock
Set a buffer from variability and service level.
Choose a service level
Higher levels reduce stockouts but raise holding cost.
Measure variability
Use the daily demand standard deviation from a representative period.
Enter lead time
The buffer grows with the square root of lead time, so shorter lead times reduce stock.
What does this tool do?
Safety stock is the extra inventory kept to absorb demand above forecast or a late delivery. The statistical approach scales the buffer with demand variability, lead time and the cycle service level you want to hit.
The Formula
Safety stock = Z × Daily demand standard deviation × √Lead timeFrequently Asked Questions
Which service level should I choose?
95% is a common balance for everyday products. Use a higher level for critical parts or high-margin items, and a lower level for cheap, slow-moving stock.
How do I estimate demand variability?
Use the standard deviation of daily demand over a recent period with similar seasonality. Include stockouts carefully, because missing sales understate true demand.