Safety stock = (maximum daily sales x maximum lead time in days) \u2013 (average daily sales x average lead time in days).<\/strong><\/p>\n\n\n\nObtaining the figures you need shouldn\u2019t be too difficult if you\u2019ve been collecting sales data. To work out maximum daily sales, take a look at your sales numbers by day over a period of time (that could be a month, quarter, or longer) and extract the highest number.<\/p>\n\n\n\n
To get your maximum lead time in days, look at your shipments for the same period and note down the shipment that took the longest time to arrive. This gives you a reasonable worst-case scenario.<\/p>\n\n\n\n
Working out average daily sales and average lead time in days will take a little more effort, but it\u2019s still a simple calculation. To calculate average daily sales, add up the number of sales over the period and divide by the number of days in the period. Similarly, to calculate average lead time, add up the total number of days it took for shipments to arrive, and divide by the number of shipments.<\/p>\n\n\n\n
Example: Mad Top Hats<\/h3>\n\n\n\n
Let\u2019s calculate the safety stock for a fictional brand called Mad Top Hats. Sarah, the Inventory Manager at Mat Top Hats, wants to put some safety stock in place for the next 100 days. She takes a look at the last 100 days of sales data and finds the maximum number of daily sales in that period was 50.<\/p>\n\n\n\n
Mad Top Hats received 5 shipments in that period, and the longest one took 8 days to arrive.<\/p>\n\n\n\n
Then, she adds up the number of sales over the 100 days, which comes to 1500. She divides that number by 100, which is 15.<\/p>\n\n\n\n
Finally, she looks at her 5 shipments and adds up the total lead time of each shipment in days. In total, her shipments took 30 days to arrive. She divides that number by 5 (number of shipments), which equals 6.<\/p>\n\n\n\n
Therefore, Sarah\u2019s safety stock calculation is as follows:<\/p>\n\n\n\n
Mad Top Hats\u2019 Safety stock for the next 100 days = (50 x 8) – (15 x 6)<\/p>\n\n\n\n
Safety stock = 310 units.<\/p>\n\n\n\n
As a result, Sarah orders an additional 310 units in her next order.<\/p>\n\n\n\n
<\/span>Safety stock calculation tool<\/span><\/h2>\n\n\n\nBelow, we\u2019ve included a calculation tool to help you work through your safety stock requirements. You should repeat the calculation for each SKU you wish to hold safety stock for.<\/p>\n\n\n\r\n\r\n
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