Quick Summary: Safety stock is additional inventory held as a buffer against uncertainty. In practical terms, it is reserve stock that helps prevent stockouts when demand exceeds expectations or when deliveries arrive later than planned. It does not alter your normal ordering pattern. Instead, it exists purely as a contingency.
Why Safety Stock Matters
Safety Stock is a buffer, measured in days, that protects an item against stocking out due to uncertainty. It is one of the most important factors in balancing service levels with inventory investment.
The primary purpose of safety stock is to guard against the two main sources of risk:
Demand Risk: The risk of under-forecasting (actual sales being higher than predicted).
Supply Risk: The risk of supplier under-performance (delivering late or in short quantities).
In the app, the safety stock level also functions as the item's minimum level or reorder point. The app's recommendations are designed so that, in an ideal world, a new order will arrive just as your stock level reaches this safety stock buffer.
Sources of Risk
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Safety stock exists to protect you from stockouts—and the lost sales and loyalty that come with them. Below are some common risks that drive the need for that buffer:
Late supply: Lead time slips beyond the promise (for example, 7 days becomes 9) because of production delays, missed pickups, or transport issues. Stock arrives later than planned, raising the chance of an out-of-stock.
Short supply: The shipment arrives, but quantities are missing (you ordered 100, only 50 show up). Regardless of why, the gap can push you into a stockout before the next delivery.
Unpredicted demand: Interest spikes suddenly (a social post, a promotion you didn’t plan for), and a normally steady item sells through faster than expected, exhausting inventory ahead of schedule.
The Inputs for the Safety Stock Calculation
The final safety stock number shown on an item’s Inquiry screen is the result of several key inputs. The app analyzes these factors daily to calculate the ideal buffer required to protect against risk.
The calculation is based on the following inputs:
Target Fill Rate
The desired percentage of product availability you are targeting for the item. A higher target fill rate results in a higher safety stock level. This is configured in Policy defaults or Policy overrides.
Replenishment Cycle (RC)
The number of days’ worth of inventory you plan to purchase at one time. This is also configured in Policy defaults or Policy overrides.
Effective RC: If a Minimum Order Quantity (MOQ) forces you to buy more than your desired RC, this field changes to Effective RC and reflects the larger, true order cycle in days.
Lead Time
The total time, in days, from placing an order with the supplier until the item is available for sale. It includes order placement time, supplier shipping time, and warehouse receipting time.
Supply Risk
A measure of your supplier’s historical performance. Risk increases when suppliers frequently deliver late or in short quantities.
Forecast Risk
A measure of forecast accuracy. Risk increases when forecasts have a history of under-forecasting (actual sales higher than predicted).
Understanding Risk: Risk % and Offset Days
Supply Risk and Forecast Risk each have two components:
Risk %: Indicates variability. A highly consistent supplier or a stable forecast has a low Risk %. Erratic delivery times or volatile demand produce a high Risk %.
Offset Days: Indicates bias.
A positive offset adds days to safety stock (for example, suppliers consistently late or forecasts consistently too low).
A negative offset subtracts days from safety stock (for example, suppliers consistently early or forecasts consistently too high).
➜ For more on this topic, read: Supply Risk & Offset Explained and Forecast Risk and Offset Explained.
Visualizing Safety Stock Relationships
To quickly view the relationship between safety stock and its key drivers, you can click on the three dots on the top right of the Safety Stock panel on the Inquiry screen.
This will reveal three simple graphs.
These graphs illustrate that:
Safety stock increases as the target fill rate increases.
Safety stock decreases as the replenishment cycle increases.
Safety stock increases as the lead time increases.
How To: Troubleshooting Safety Stock Policy Overrides
⚠️ Watchouts
Don't Plan to Use It: Safety stock is your emergency buffer, not your active cycle stock. The system is designed to place a new order before you dip into it. Consistently consuming your safety stock is a red flag that your inputs (like lead time or forecast) may be inaccurate.
Risk is Dynamic: Because the calculation is dynamic, a sudden, unexpected event (like a supplier delay or a random sales spike) can cause your safety stock to increase. It will also decrease as performance becomes more stable and predictable.
💡 Tips
Investigate the "Why": When you see a high safety stock, investigate which source of risk is the primary driver. Is it poor supplier performance (Late/Short Supply) or inaccurate forecasting (Unpredicted Demand)? This tells you where to focus your improvement efforts.
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