Also called buffer stock, service level, safety lead time
What is safety stock?
Inventory held deliberately to absorb demand that is higher than expected or supply that is later than promised.
What else it is called
- Other names
- buffer stock, service level, safety lead time
- In French
- stock de sécurité
Related entries
Understanding safety stock
Stock held on purpose to cover the difference between what you expected and what happened: a customer ordering more than forecast, or a supplier arriving two weeks late. It is sized from how much those things vary, not from how big the average order is.
The decision that drives the number is the service level, meaning how often you are willing to be short. That choice should differ by part. A fastener that stops the whole line deserves a high level; a slow-moving spare does not, and setting one blanket target across every part is how plants end up with warehouses full of the wrong things.
The honest alternative is often to attack the variability instead of covering it. A supplier who delivers reliably needs far less protection than one who does not, and that conversation is usually cheaper than the stock.
How it is calculated
Safety stock = a service-level factor × the variability of demand during the replenishment time
The service-level factor comes from a statistical table: about 1.65 for 95 per cent, about 2.33 for 99 per cent. Going from 95 to 99 per cent costs roughly 40 per cent more stock.
In practice
Rank your parts by what a stockout actually costs. Most plants discover they are holding generous cover on cheap, reliable items and almost none on the single-sourced import that would stop the line.
Frequently asked
How much safety stock should we carry?
Enough to hit a service level you chose deliberately, for that part, given how variable its demand and supply actually are. Set it per part or per class of part. A single blanket rule guarantees too much of some things and not enough of others.
Does just-in-time mean no safety stock?
No. It means not holding stock to cover problems you could fix instead. Deliberate cover on a long-lead, single-sourced or imported item is a risk decision, and after the disruptions of the early 2020s most manufacturers make it explicitly.