Safety Stock

A buffer of extra inventory held to protect against demand or supply variability.

Area: Inventory
Also known as: buffer stock
In this area: 44 terms of 259

Safety stock is the cushion of stock you keep above expected demand to avoid stockouts when sales spike or a supplier is late. It absorbs the uncertainty in both demand and lead time.

Set it too low and you risk lost sales; set it too high and you tie up cash and warehouse space. The right level balances service level against carrying cost.

How it is calculated

Safety stock = Z × σ_LT

Z is the service-level factor; σ_LT is the standard deviation of demand over lead time.

See it in AWRA OpsHub

Inventory Balancing & Replenishment