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In the Supply Chain, preventing inventory failures is one of the key everyday tasks. To achieve this, one of the most effective tools is the safety stock, also known as Safety Stock. This practice helps to deal with unforeseen events such as unexpected peaks in demand, supplier delays or planning errors.
In this article, we explain what security stock is, how to calculate it and why integrating it into your inventory strategy can make the difference between meeting your service levels or not.
El safety stock It is a reserve of additional inventory that is kept in the warehouse to deal with unexpected variations in demand or supply problems. Its function is ensure operational continuity when cycle inventory runs out faster than expected or when suppliers don't deliver on time.
It is an especially useful tool for products with high turnover, items critical to the operation or in contexts of high uncertainty. Have a well-calculated safety stock reduces the risk of bankruptcies, avoids losses due to lack of product and improves the customer experience.
In inventory planning, there are three key concepts that work together:
Visually, the safety stock acts as a safety net. When inventory reaches that point, it's a clear alert to replenish. This way, the operation never runs out of product, even if the supplier's lead time is extended or demand increases more than expected.
The more unpredictable the demand for a product, the greater the safety stock must be to avoid bankruptcies. This especially applies to seasonal products or products with erratic behavior.
If your vendors' delivery times are long or inconsistent, you need a larger cushion to compensate for those delays. Lead time is key to defining when to order, but also how much to keep in reserve.
Not all products have the same impact on the business. Those that are essential to the operation, or that generate the majority of sales, must have a higher safety stock to ensure their availability.
The calculation of the safety stock depends on different factors and the nature of the product and company. However, there is a standard way to calculate it that serves as a guide if you are calculating the safety stock for the first time.
Standard safety stock formula:
Safety Stock (SS) = (PME — PE) × DM
Where:
That is to say: you multiply the difference between the maximum term and the usual term by the average demand. The result is the amount you need to have as a “mattress” to avoid running out of product if the supplier is late.
This approach is especially useful if you have frequent variations in delivery times or if you handle products that are highly critical to your operation. And if you automate this calculation with tools such as Datup, you can see it in real time depending on the variability of your demand and the performance of your suppliers.
A mass-market company detected that one of its best-selling products suffered frequent bankruptcies, especially during promotional campaigns or during delays with its supplier.
To solve this, the supply chain team defined a minimum level of additional inventory (safety stock) that would allow them to cover unforeseen variations in demand without interrupting deliveries.
Since then, every time the available inventory approaches that level, a replenishment is automatically activated.
This resulted in greater operational continuity, fewer logistical emergencies and an improvement in the fulfillment rate of key orders.
A good safety stock allows fulfill orders on time, improve the customer experience and reinforce the reliability of your brand. In markets where competition is high, this makes a difference.
Every stock break represents a sale that doesn't materialize. If it happens frequently, it ceases to be an exception and becomes a constant flight of income. The safety stock acts like a mattress which avoids these gaps and maintains active business flow, even when there are unexpected peaks.
Without safety stock, every mismatch becomes an emergency. This means impromptu purchase orders, suppliers under pressure, and higher logistics costs. With a well-calculated buffer, you can operate with greater predictability and without relying on last-minute decisions.
Having a well-defined minimum inventory level improves coordination between areas such as purchasing, production and logistics. It facilitates more agile decisions, reduces friction between teams and allows business commitments to be met without compromising efficiency.
Not all products need priority, in order to manage your inventory well, it's key to judiciously define which products really need safety stock. It's not about filling the cellar, but about protecting what has the most impact.
Here's a mini checklist to check if your most critical products are well covered in the face of unforeseen events:
If you answered that ✔️ to two or more, you need to consider a safety stock.
It will support you in the face of uncertainty, operational stability and better service levels without relying on intuition.
Having safety stock for the most important products in your portfolio is a key part of your company's sustainable growth. Ignoring this management can result in Invisible losses that affect your income without you realizing it.
If you haven't done so yet, it's time to review your security stock and rely on tools that automate this process.
With Datup, you can calculate the safety stock of each product automatically, without imprecise spreadsheets or manual effort. Less operational burden, faster decisions and a more strategic approach for your team.
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