Inventory Management
Example of Safety Stock Calculation
Example of 3 ways of setting safety stock.
What it does
Example of 3 ways of setting safety stock.
See it in action
A worked example
One method: safety stock = safety factor × standard deviation of demand × the square root of the lead time in periods. It assumes demand is roughly normal and the lead time is fixed.
| Standard deviation | Safety factor | Lead time (periods) | Safety stock |
|---|---|---|---|
| 4 | 2 | 1 | 8 units |
| 4 | 2 | 4 | 16 units |
A longer lead time needs a bigger buffer. The result is a buffer, not a guaranteed service level.
What data it needs
We will list the data this Tool-module needs when it is ready to launch.