Safety stock

Extra stock held to cover demand spikes or late deliveries.

Safety stock is extra inventory held to absorb demand spikes and late deliveries. It is the buffer that keeps you from stocking out when a busy week or a delayed order arrives.

How much to hold

One simple method uses the gap between normal and peak usage over the lead time:

Safety stock = (peak daily usage − average daily usage) × lead time

If you normally sell 10 a day but have seen 18, and lead time is five days, safety stock is 40 units. More sophisticated methods weigh demand variability, service level, and lead time variance.

The trade-off

Safety stock costs money to hold. Too little and you stock out; too much ties up cash. Set it deliberately per item, not as one blanket number, and review it when demand or lead times change.

Estimate yours with the safety stock calculator.