1. What is Safety Stock?

Safety stock is the additional inventory held to mitigate the risk of stockouts caused by uncertainties in demand and supply chain. It acts as a buffer against variability in demand and lead time.

2. How Does the Calculator Work?

The calculator uses the safety stock formula:

Where:

• \( Z \) — Z-score corresponding to desired service level
• \( \sigma_D \) — Standard deviation of demand
• \( L \) — Lead time in days

Explanation: The formula accounts for demand variability and lead time variability to determine the appropriate buffer stock level.

3. Importance of Safety Stock Calculation

Details: Proper safety stock calculation helps maintain optimal inventory levels, balancing the costs of holding inventory against the risks of stockouts.

4. Using the Calculator

Tips: Enter the Z-score corresponding to your desired service level, standard deviation of demand, and lead time. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I determine the Z-score for my service level?
A: Common Z-scores: 1.28 (90% service level), 1.65 (95%), 2.33 (99%). Use statistical tables for other values.

Q2: What's a good standard deviation of demand?
A: This varies by product and industry. Calculate from historical demand data over a representative period.

Q3: Should lead time be in days or weeks?
A: The calculator uses days. Convert weeks to days by multiplying by 7 if needed.

Q4: What are limitations of this formula?
A: Assumes demand is normally distributed and doesn't account for supply variability. More complex models exist for these cases.

Q5: How often should I recalculate safety stock?
A: Recalculate when demand patterns change significantly, lead times vary, or service level targets are adjusted.