Formula
The buffer is the busiest case minus the typical case:
Safety stock = maximum daily demand × maximum lead time − average daily demand × average lead time
If the typical case is larger, the buffer is zero rather than a negative stock.
Assumptions
- Maximums are the high case you want to cover.
- Averages are the usual demand and lead time.
Worked example
A peak of 30 units over 21 days against an average of 20 units over 14 days needs 350 units.
Input definitions
- Maximum lead time
- The longest replenishment you want to cover, in days.
- Average lead time
- The usual replenishment, in days.
Limitations
This is not a statistical service level. It does not use a standard deviation or a z score.
Questions
Why can the result be zero?
If average demand over the lead time is at least the maximum case, no extra buffer is required by this formula.
Where do I use this number?
Type it as the safety stock on the reorder point page.