Safety stock protects against uncertainty. The useful question is not only how much, but which uncertainty and service commitment justify it.
Compare safety-stock service levelsWhat safety stock does
Safety stock protects a replenishment cycle from demand or lead-time variation. It does not fix poor master data, chronic capacity constraints, minimum-order effects, or obsolete forecasts.
Choose the method
Use Method A when demand varies and lead time is stable. Use Method B when demand is stable and lead time varies. Use Method C when both vary and can reasonably be treated as independent.
Align the units
Daily demand variability requires lead time in days. Weekly variability requires lead time in weeks. Mixing periods is one of the most common and consequential errors.
Service level and z-score
Cycle service level is the probability of avoiding a stockout during a replenishment cycle. It is not fill rate. A 95% one-sided target uses z = 1.644854, not 1.96.
Worked example
At 100 units/day, demand SD 20/day, mean lead time 9 days, lead-time SD 1.5 days, and 95% service, Method C returns 266 whole units. At $12.50 each, that is about $3,325 of inventory.
Where the model fails
Intermittent demand, correlated variability, promotions, supply allocations, shelf-life limits, and heavy-tailed delays require segmented policies or simulation rather than blind formula use.
Test your own assumptions.
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Compare safety-stock service levels