Estimate a buffer inventory level using average and maximum demand alongside average and maximum lead time.
Result
Calculating the sample result.
Safety stock is the cushion that protects service levels when demand spikes or suppliers arrive late. Without it, reorder points can look precise but fail in real operations.
Inputs
Outputs
Multiply maximum daily usage by maximum lead time, then subtract expected demand during average lead time. The remainder is the safety buffer.
Safety stock = (max daily usage x max lead time) - (avg daily usage x avg lead time)
Supplier reliability check
A SKU can peak at 26 units per day with a worst-case 21-day lead time. Average usage is 18 per day and average lead time is 14 days.
Inputs
Steps
Result
Yes, if demand and lead time are extremely stable, but most operators keep some buffer to avoid service failures.
Usually no. Fast movers, seasonal products, and long-lead-time items often need different buffers.
Keep going
Estimate the inventory level that should trigger a new purchase order based on demand, lead time, and safety stock.
Measure how often inventory is sold and replenished over a period using cost of goods sold and average inventory.
Estimate the order quantity that balances ordering costs against annual holding costs.
