Safety stock
What is safety stock?
Safety stock is inventory held deliberately above expected demand to absorb variability: a late supplier, an order spike, a count that turned out to be wrong. It is a deliberate quantity of extra stock, and like all insurance the right amount balances what the stockout costs against what the stock costs to hold.
What sets the level
- Variability of demand: steady consumables need less buffer than lumpy orders (produce season and quarter-ends).
- Variability of supply: a supplier who misses dates often needs more of your buffer than one who does not.
- Lead time: longer and less certain lead times widen the window the buffer must cover.
- Service target: the percentage of orders you intend to fill from stock, chosen rather than assumed.
The trade it represents
Every unit of safety stock is cash that sits still and space that cannot be used for something else. Too little and OTIF falls (see the backorders it produces); too much and the warehouse fills with stock that moves slowly, which hides problems: a count error in dead stock is discovered at the annual count, not on Tuesday. The right level is a reviewed number, not a habit.