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Safety stock – what is it and how to calculate it?

A free resource from EazyStock ‘How to Calculate Safety Stock for Inventory Management’ will show you various methods how to calculate safety stock to improve product availability.

About EazyStock free eBook

In this eBook we discuss why traditional inventory management strategies are no longer effective at dealing with today’s dynamic marketplaces and supply chains. We then look at how inventory optimisation techniques could provide the answer.

We also provide strategies for getting the right balance between inventory costs and customer service levels.

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Discover with this eBook:

  • The importance of accurate safety stock levels
  • The basics of safety stock management
  • Methods and formulas for calculating safety stock & examples

What is a safety stock?

Safety stock, also called buffer stock, is the layer of inventory carried by businesses to help prevent stock shortages that occur due to unforeseen events.

Safety stock is used to manage supply and demand uncertainty, such as unexpected surges in sales or delays to lead times (supplier deliveries or production delays). Safety stock helps cover such eventualities and help prevent stockouts.

Inventory management teams are constantly looking to achieve high service levels (a measure of product availability) without tying-up too much capital in stock. An important piece of this puzzle is correctly calculating safety stock.

Tips for using safety stock calculations

When using safety stock formulas here are some key things to remember.

Choose your safety stock calculation wisely!

Buying inventory involves tying-up capital, so it’s important to calculate safety stock as accurately as possible.

Check your calculations regularly.

Manual, static safety stock calculations can result in excess stock or the risk of run-outs.

Aim to use a safety stock calculation that incorporates service levels and combine with an inventory classification model, such ABC analysis.

You can then have different safety stock and service levels based on the importance of your stock.

Don’t focus too much on safety stock.

Try to improve the accuracy of demand forecasts and work with suppliers to improve lead time reliability.

Want to learn more? Get our free eBook on safety stock now!

Choose EazyStock optimisation

The simplest safety stock formulas are the easiest to calculate, but they fail to account for service levels (fulfilment targets) or degrees of supply and demand uncertainty. Unfortunately, if you advance to using more complex maths, things start to get very complicated, time consuming and open to human error.

Many companies are therefore turning to inventory optimisation tools, such as EazyStock.

EazyStock easily connects with your ERP or inventory management system. It not only calculates safety stock at SKU level, but also automates demand forecasting, stock classification and reorder point calculations.

Inventory managers no longer need to be excel geniuses or ‘human calculators’, giving them more time for strategic decision-making and looking after suppliers and customers.

Why EazyStock?

Ensure stock availability

Ensure stock availability

Make sure you always have the right products on the shelf to prevent stock outs and delight your customers.

Optimise demand forecasts

Optimise demand forecasts

Utilise advanced algorithms to track product demand, accounting for life cycle stages, trends and seasonality variances.

Lower inventory levels

Lower inventory levels

Get rid of excess and obsolete stock, freeing-up working capital for investment elsewhere in your business.

Automate re-ordering

Automate re-ordering

Produce automated order proposals to process in EazyStock or send back to your ERP.

Accurate replenishment

Accurate replenishment

Automatically calculate safety stock levels, re-ordering points and order quantities to ensure optimised inventory levels.

Be smarter with suppliers

Be smarter with suppliers

Place orders more cost-effectively by considering suppliers’ delivery schedules, lead times, discounts and costs.

Improve efficiency & save time

Improve efficiency & save time

Ditch the manual spreadsheets and save time that can be spent on strategy and innovation.

Get a fast ROI

Get a fast ROI

Benefit from rapid ERP integration and get up and running fast with a system that’s easy to deploy.

They’ve already trusted us

Get our free eBook about Safety Stock

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