Safety Stock Calculator

Welcome to our safety stock calculator, which will save you from the worst scenario for your business, aka running out of stock. It means lost sales, customers left in the lurch, and momentum put on hold. The way to avoid it is to have a buffer of extra inventory on hand, or what we call safety stock. Any seasoned supply chain manager will tell you its value.

You could do the math by hand, but there is no need to be tied up with a spreadsheet when our safety stock calculator will give you your ideal figure in a fraction of the time. In this article, we will explore:

• What safety stock​ is;
• What safety stock inventory is; and
• How to calculate safety stock.

Let’s go!

Think of safety stock as an insurance policy for your warehouse. Whether you are facing an unanticipated delay from a supplier or a sudden spike in demand, this extra safety stock inventory keeps things moving. Without it, a minor hiccup in the supply chain can bring operations to a standstill.

Periodic check-ins are also the perfect time to calculate your overall turnover and analyze your remaining assets with an ending inventory calculator.

Here’s how to use the safety stock calculator:

1. Input the most units sold or used on any given day in the Max daily usage field; think of a sudden spike in sales or your peak season.
2. Enter the number of days for the longest wait you have had on a replacement shipment from your supplier in the Max lead time field.
3. Input your normal, day-to-day unit sales in the Average daily usage field.
4. Enter the typical number of days you can expect for a standard order to come in, in the Average lead time field.
5. Your safety stock and reorder point will appear instantly!

Our calculator is built on a tried-and-true industry standard. The safety stock formula is designed to offset your typical averages with your most demanding days and longest waits:

Here’s what those variables mean when performing a safety stock calculation:

• $\text{Max daily usage}$ — The unit count for a particularly heavy sales day.
• $\text{Max lead time}$ — In days, the longest it has ever taken to get a replacement order in.
• $\text{Average daily usage}$ — What you would normally expect to sell.
• $\text{Average lead time}$ — Norm for how long an order takes to come in.

If you want to account for standard deviations in both demand and delivery delays, our calculator also supports the statistical safety stock formula:

where:

• $Z$ — Service level factor (Z-score);
• $LT$ — Average lead time (in days);
• $D$ — Average daily usage (units per day);
• $\sigma_d$ — Demand variability (standard deviation of daily sales); and
• $\sigma_{LT}$ — Lead time variability (standard deviation of delivery times).

In the calculator, lead time variability is treated as 0 when “Include time variability” is unchecked.

Let’s look at how to calculate safety stock in inventory​ using a practical example: custom keyboards. Let’s say 15 is the most you have sold in one day (your max daily usage), while 7 is your average daily usage. On top of that, a bad shipping problem once meant a 23-day wait for new stock (your max lead time), though a 10-day wait is more common (your average lead time).

How do you find safety stock​? ​Run those numbers through the formula:

1. Worst-case demand:

   15 units × 23 days = 345 units
   
   

2. Average demand:

   7 units × 10 days = 70 units

    

3. The final results:

   345 − 70 = 275 units

You are left with 275 units. That is the amount of safety stock you want to have in reserve to ensure you do not run dry.

To balance these carrying costs against your ordering costs, use an economic order quantity (EOQ) calculator to determine the most cost-effective order size.