Safety stock and reorder point calculator
Find out when to reorder so you do not run out, how much buffer stock to hold, and how much cash that buffer ties up.
Stock you can afford, not just stock you need
A reorder point tells you when to buy. A cash forecast tells you whether the money will be there when the deposit and the balance are due. I build 12 month cash and inventory forecasts for ecommerce brands, from $500.
Request a free CFO DiagnosticSafety stock vs reorder point
Safety stock is the extra inventory you hold in case sales run hot or a shipment is late. Reorder point is the stock level that triggers the next purchase order. When your units on hand plus units already on order fall to the reorder point, you order.
Lead time should run from the day you place the order to the day the stock can be sold, including production, transit, customs and receiving at your warehouse or 3PL. Using only the transit time is one of the most common reasons brands stock out.
The two formulas
Simple: max and average
Easy to use when you know your normal and busy days and your normal and worst lead times. It covers the case where your best sales run happens during your slowest delivery, so it tends to hold more stock than you need.
Statistical: service level
Z comes from the service level you choose: 1.28 for 90%, 1.64 for 95%, 1.96 for 97.5% and 2.33 for 99%. The standard deviations measure how much daily sales and lead times vary. A spreadsheet's STDEV function on a few months of daily sales gives you σdemand. This method lets you trade stock against risk deliberately, product by product.
Worked example
A product sells 20 units on a normal day and 30 on a busy one. Lead time is usually 30 days, at worst 40. Landed cost is $12.70 a unit.
| Safety stock, simple method (30 × 40 − 20 × 30) | 600 units |
| Expected sales during lead time (20 × 30) | 600 units |
| Reorder point | 1,200 units |
|---|---|
| Cash tied up in safety stock (600 × $12.70) | $7,620 |
With the statistical method at 95%, a daily standard deviation of 5 units and a lead time standard deviation of 5 days, safety stock drops to 171 units and the reorder point to 771. That frees about $5,450 of cash for this one product, at the cost of a 5% chance of running short in a given cycle.
What safety stock costs you
Safety stock is not a one time purchase. As long as you keep the buffer, its value sits on your shelf instead of in your bank account. Across a catalog of 50 or 100 products, the difference between a 95% and a 99% service level can be tens of thousands of dollars of cash. Set higher levels for best sellers where a stockout costs you customers and rankings, and lower ones for slow or easily replaced products.
Frequently asked questions
What is the difference between safety stock and reorder point?
Safety stock is the extra inventory you keep to cover demand spikes and late deliveries. The reorder point is the stock level that tells you to place the next order: expected sales during the supplier lead time plus your safety stock.
Which safety stock formula should I use?
Use the simple max and average method if you only know your best and normal days and your longest and normal lead times. Use the statistical method if you have at least a few months of daily or weekly sales history, because it lets you choose a service level and usually holds less stock for the same protection.
What service level should I choose?
95% is a common default. Use 97.5% to 99% for best sellers where a stockout loses customers, and 90% for slow or easily substituted products. Each step up costs noticeably more stock and cash.
How much cash does safety stock tie up?
Multiply safety stock units by your landed cost per unit. That cash sits on the shelf permanently as long as you keep the buffer, so it belongs in your cash forecast.