Safety stock is the margin of error required based on the customer service level and the deviation of the demand during the lead time. The safety stock coverage level is the z-value in standard statistics for calculating the confidence interval for a customer service level.
Safety Stock = Required Inventory Coverage Level * Standard Error of the Demand during the Lead time
Safety Stock = Required Inventory Coverage Level * RMSE * Square-root of (Lead time)
What error measure to use for setting safety stocks? (New article!)
Safety Stock Coverage Values at various required Service Levels ©
©2004-2014 by Demand Planning, LLC. All rights reserved. Privacy
policy | Refund and Exchange policy
| Terms of Service | FAQ
Demand Planning, LLC is based in Boston, MA | Phone: (781) 995-0685 | Email Us!
Demand Planning | S&OP | Retail Forecasting | Supply Chain Analysis: » Value Chain Metrics » Inventory Optimization | Supply Chain Collaboration