Inventory & Supply Chain

What is Safety Stock?

Name: Infonoxe Technologies
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Safety Stock: Safety Stock is the buffer inventory held above the average demand during lead time to protect against demand variability and supply delays.

Calculating Safety Stock

Simple formula: Safety Stock = Z × σ_d × √L, where Z = desired service level Z-score (1.65 for 95%, 2.33 for 99%), σ_d = standard deviation of daily demand, L = lead time in days. Higher service level or more variable demand/supply requires more safety stock, tying up more capital.

Safety Stock in ERPNext

Set safety stock via the Reorder Level on the Item master: Reorder Level = Average Daily Demand × Lead Time Days + Safety Stock. When stock falls to the reorder level, ERPNext auto-creates a Material Request. The reorder quantity covers demand through the next lead time plus safety stock replenishment.

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