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Safety stock (often called buffer stock) is the extra level of stock/inventory (raw materials or finished goods) carried by a company to reduce the risk of running out of stock due to supply or demand uncertainties.
It ensures you always have enough stock of all items for your customers – a crucial aspect of inventory management. The trick is to hold safety stock without overstocking.
For more information, read our full blog on the reasons to carry safety stock.
Reasons to carry safety stockSafety Stock = (Maximum daily usage × Maximum lead time) − (Average daily usage × Average lead time)
There are 3 main formulas to calculating safety stock:
The above formula is the “Average/Max safety stock formula” and is a simple formula to calculate safety stock easily, but it can lose accuracy in real life scenarios where stock usage and lead times are dynamic and fluctuate easily.
For a more information on all the formulas to calculate safety stock, have a look at our How to calculate safety stock to save money blog. Or read our free eGuide on How to calculate safety stock.
How to calculate safety stockVisit your local website for products and services specific to your country.
