What is safety stock?
Last reviewed
Extra inventory held to cover demand spikes and supplier delays.
Safety stock is the extra inventory you hold on top of expected demand, so that a sales spike or a late shipment does not leave you out of stock.
Two common formulas
Max-minus-average (no statistics needed):
Safety stock = (max daily sales × max lead time) − (avg daily sales × avg lead time)
Service-level formula (demand varies, lead time steady):
Safety stock = Z × σ(daily demand) × √(lead time in days)
Z sets how often you accept running out during a lead time. Z = 1.65 covers about 95% of lead-time periods, and Z = 2.33 about 99%.
Worked example
A SKU averages 12 units a day, with a standard deviation of 4 units. Lead time is 30 days, and you want 95% cover:
1.65 × 4 × √30 ≈ 1.65 × 4 × 5.48 ≈ 36.2, so hold 37 units (always round safety stock up)
Safety stock feeds straight into the reorder point.
Frequently asked questions
What is a simple safety stock formula?
(Maximum daily sales × maximum lead time) − (average daily sales × average lead time). It needs no statistics, but it tends to overstock SKUs that had one unusual day.
Is more safety stock always safer?
No. Every unit of safety stock is cash tied up and storage paid for. Hold more on fast, profitable SKUs with unreliable suppliers, and less on slow SKUs with short, reliable lead times.