Safety Stock
Extra inventory kept as a buffer against demand spikes or supplier delays.
Definition
Safety stock is a buffer quantity of inventory held beyond the expected demand during a replenishment cycle. It protects against two risks: unexpectedly high usage (demand spike) and delayed delivery from the supplier. It is the difference between a par level and the bare minimum needed.
Formula
Safety Stock = (Maximum Daily Usage − Average Daily Usage) × Supplier Lead Time
Why It Matters
Demand is rarely perfectly predictable. A supplier may be delayed. A team might use more supplies during a busy period. Safety stock absorbs these variations so that normal fluctuations never cause a stockout. Without safety stock, any delay or spike results in an empty shelf.
Example
Average paper usage: 2 reams/day. Maximum ever observed: 4 reams/day. Supplier lead time: 3 days. Safety Stock = (4 − 2) × 3 = 6 reams. Keep 6 extra reams as buffer on top of your expected usage buffer.
Related Terms
Put Safety Stock into practice
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