Safety stock

Safety stock is the buffer inventory held above expected demand to absorb spikes in usage or supplier delays during the lead time.

ByHoang TruongUpdated July 11, 2026

See it move

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Maximum daily usage of 45 units over a 12-day maximum lead time gives 540 units of worst-case demand. Average daily usage of 30 units over a 9-day average lead time gives 270 units of expected demand. The 270-unit difference between them is the safety stock held to absorb a usage spike or a delivery delay.

Where it fits

SubjectCost AccountingCoreTopicStrategic & Lean Cost ManagementCore

The formula

LaTeX

SS = (U_{max} \times L_{max}) - (U_{avg} \times L_{avg})

Variables

$S S$: Safety stock (units)
$U_{ma x}$: Maximum daily usage (units/day)
$L_{ma x}$: Maximum lead time (days)
$U_{a v g}$: Average daily usage (units/day)
$L_{a v g}$: Average lead time (days)

Sizes the buffer stock needed to cover the worst-case combination of high usage and a long supplier lead time.

Check yourself

PracticeCORE

A warehouse's maximum daily usage of a part is 50 units, occurring during the supplier's longest observed lead time of 10 days. Average daily usage is 35 units and average lead time is 8 days. What safety stock should the warehouse hold?

Select an answer to check your understanding.