GUIDE
How to calculate safety stock.
Safety stock is an inventory buffer intended to protect service levels when demand or replenishment timing differs from expectation.
A practical variability-based formula
Safety stock = Z × demand standard deviation × √lead time.
The Z factor represents the desired service level. Higher service targets require a larger buffer when the other inputs stay constant.
Why fixed percentages can mislead
A blanket percentage ignores SKU-level variability and lead time. Two items with identical average demand can require very different buffers if one has more volatile demand or a slower supplier.