Glossary
What is Safety Stock?
Last updated July 2026
Definition
Safety stock is the buffer inventory held to protect against demand and supply variability. Set too high, it becomes a leading cause of excess and carrying cost.
Formula
Safety Stock ≈ Z × σ(demand) × √(lead time) The right safety stock reflects actual demand variability and lead time, not habit. Much industrial excess traces back to safety stock and reorder points set once and never revisited.
Right-sizing safety stock is one of the fastest, lowest-risk levers for cutting working capital without hurting fill rate.
Part of Excess & obsolete inventory.
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