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Safety stock calculator: how much buffer to hold
Enter your average demand, how much it varies, your lead time and how much that varies. Pick the service level you want and get the buffer stock to hold.
Safety stock equals the service level factor times the square root of lead time times demand variance, plus average demand squared times lead time variance. At a 95 percent service level and the default inputs it is about 151 units.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Hold about 151 units of safety stock. Together with demand during the lead time, that puts your reorder point at 711 units, and the buffer is 27% of the demand you expect while waiting for a delivery.
| Service level factor (Z) | 1.64 |
|---|---|
| Safety stock | 151 units |
| Reorder point with this buffer | 711 units |
| Share of lead time demand held as buffer | 27% |
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How the safety stock calculator works
The formula
Safety stock = Z x square root of (lead time x demand standard deviation squared + average demand squared x lead time standard deviation squared). Z comes from the service level.
Safety stock protects you from two uncertainties: demand that runs above average, and deliveries that arrive late. The formula combines both, which is why it beats a flat rule such as two weeks of stock.
The service level is a business choice, not a maths one. Moving from 95 to 99 percent roughly adds half again to the buffer. Decide it per item, based on what a stock-out costs, and keep the high levels for the items that stop production or lose a customer.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Pull daily demand for the last 6 to 12 months and calculate the average and standard deviation.
- Record actual lead times for recent deliveries and calculate their average and standard deviation.
- Choose a service level for the item and read the buffer. Feed the result into the reorder point calculator.
Mistakes that skew the answer
Using monthly figures with daily lead time
Keep every input in the same time unit. If demand is per day, lead time is in days.
Applying one service level to every item
A part that halts a line deserves more buffer than a fast-moving consumable you can expedite. Set levels by item class.
Treating the result as fixed
Variation changes with the season and the supplier. Recalculate when you change supplier or after a run of late deliveries.
What to do with the result
Add the buffer to the reorder point, then price it with the inventory carrying cost calculator so you can see what each extra point of service level costs you each year. If a supplier is the main source of the variation, raise it in your next supplier scorecard review.
Questions about the safety stock calculator
What is a good service level?
There is no single answer. Many teams use 90 to 95 percent for ordinary items and higher for critical parts. The right figure balances the cost of the extra stock against the cost of a stock-out.
What if I only have lead time variation?
Set demand variation to 0. The formula then reduces to average demand times the lead time deviation times Z.
How do I get a standard deviation?
Use the STDEV function in Excel or Google Sheets on a column of daily demand, or on a column of lead times in days.
Is safety stock the same as buffer stock?
In practice yes. Both mean stock held above expected demand to absorb variation.