Safety Stock
A buffer stock quantity in inventory policy used to absorb demand variability and lead-time uncertainty during the lead time, calculated from the demand standard deviation, the lead-time standard deviation, and the target service level.
Timeline (last 90 days)
Service level is usually defined as the probability of not stocking out during the lead time (e.g., 95%), or the proportion of demand met within a cycle (fill rate); the higher the service level, the greater the required safety stock and the more cash tied up.
The classic safety stock formula is: safety stock = z × sqrt(lead time × demand variance + average demand² × lead time variance).
The safety stock formula assumes demand is approximately normal and independent, but actual demand is often intermittent, trending, or seasonal, in which case more robust methods such as bootstrap or quantile regression should be used.
All Facts (3)
Service level is usually defined as the probability of not stocking out during the lead time (e.g., 95%), or the proportion of demand met within a cycle (fill rate); the higher the service level, the greater the required safety stock and the more cash tied up.
50%UnverifiedThe classic safety stock formula is: safety stock = z × sqrt(lead time × demand variance + average demand² × lead time variance).
50%UnverifiedThe safety stock formula assumes demand is approximately normal and independent, but actual demand is often intermittent, trending, or seasonal, in which case more robust methods such as bootstrap or quantile regression should be used.
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