How to calculate safety stock for inventory management

Determining appropriate inventory levels is one of the most important and most challenging tasks operations managers face. If you carry too much inventory, you tie up money in working capital; if you don’t carry enough inventory, you face stock outs and unhappy customers.

Safety (or buffer) stock is the extra layer of inventory that prevents stock outs and back orders.

This eGuide goes through different methods for calculating safety stock and strategies to find the right balance between inventory costs and customer service levels. You’ll discover:

• The basics of safety stock management
• Why companies should carry safety stock
• Methods of calculating safety stock, including calculation equations and examples