Safety Stock & Reorder Point Calculator

How it works

Safety stock is the extra inventory you keep on hand so you don't run out when demand spikes or your supplier is late. Without it, you stock out and lose sales. With too much of it, your cash sits dead on a shelf.

Reorder point is the number that says "place your next order NOW." It's calculated so that when your new shipment arrives, you'll still have just enough left to cover any surprises during the lead time.

Service level to Z-score

The Z-score is the only part of the formula most people have to look up. It converts your target service level — how often you want to be in stock — into the number of standard deviations of buffer that target requires.

Service level is measured per replenishment cycle, not per year. A 95% target on an item you reorder monthly means you expect to run short in roughly one month out of twenty — not one year in twenty.

The mistake almost everyone makes

Setting every item to 99% because stocking out feels unacceptable. The cost of that decision is not linear. Going from 95% to 99% raises the Z-score from 1.65 to 2.33 — 41% more buffer stock on every item, permanently, to remove about four stockouts per hundred cycles.

That is worth paying on the items where a stockout costs you a customer, and wasteful on the long tail where it costs a mild apology. Set service level per class, not globally — high on your A items, lower on C. That is exactly what an ABC analysis is for.

The second mistake is assuming safety stock scales with lead time. It scales with its square root. Doubling a supplier's lead time does not double the buffer — it raises it by about 41%. Useful when you are weighing a slower supplier against a cheaper one: the extra stock you carry is smaller than it feels.