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Safety stock and reorder point

Enter average usage and its variation, supplier lead time and its variation and the target service level to get safety stock, reorder point, holding cost and a verification simulation.

Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.

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Calculate from history (paste from Excel)

Paste the usage of each period and, if available, the observed lead times. Mean and standard deviation are calculated and sent to the fields above.

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See what was read
—Safety stock and reorder point
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Safety stock versus service level

Each extra point of service level costs more stock; near 100% the curve shoots up.

Tap the chart to see the values.

180-day simulation

On-hand stock with random usage and lead times generated from the means and deviations entered.

Tap the chart to see the values.

The report gathers this page's inputs, results, equations, assumptions and references, with fields for project, engineer and revision. In the print dialog, choose Save as PDF.

Method, assumptions and references

Equations used

Continuous review: SS = z · √(L · σd² + d² · σL²); reorder point = d · L + SS
Periodic review: SS = z · √((R + L) · σd² + d² · σL²); order-up-to level = d · (R + L) + SS
z = Φ⁻¹(service level); average inventory ≈ SS + Q/2 (or SS + d·R/2)
Simulation: 5 runs of 1,500 days with truncated normal usage and lead time, lost sales on stockout

Assumptions and limits

  • Daily usage and lead time independent and roughly normal; for slow movers use the Poisson distribution (spare parts calculator).
  • The service level is per cycle (chance of no stockout in each replenishment); fill rate is usually higher and shows in the simulation.
  • The simulation uses fixed seeds so each calculation gives the same result.

Standards and technical documents

  • Silver, E. A.; Pyke, D. F.; Thomas, D. J. Inventory and Production Management in Supply Chains, 4th ed. CRC, 2017
  • Chopra, S.; Meindl, P. Supply Chain Management, 7th ed. Pearson, 2019
  • ASCM (APICS) CPIM Body of Knowledge

U.S. regulations

  • ASC 330 (Inventory)
  • OSHA 29 CFR 1910.176: handling and storage of materials

Frequently asked questions

How do you calculate safety stock?

With average usage of 120 units/day (std. dev. 35), a 12-day lead time (std. dev. 3) and a 95% service level, safety stock is 1.645 × √(12 × 35² + 120² × 3²) ≈ 625 units.

What is the difference between safety stock and reorder point?

Safety stock covers variation. The reorder point is the level at which you order: average usage during the lead time plus safety stock.

Why does lead time variability matter so much?

Because each extra day of delay consumes a full day of average demand. With high usage, a few days of lead time variation need more stock than daily demand variation.