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How to calculate Safety stock

The Safety stock formula, with plain worked examples you can check yourself.

Safety stock = (Max − Avg) × L

Worked examples

Max = 50 · Avg = 40 · L = 4Safety stock = 40
Max = 60 · Avg = 40 · L = 4Safety stock = 80
Max = 70 · Avg = 50 · L = 4Safety stock = 80

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Operations.

Related terms

Safety stockBottleneckOutsourcingEconomies of scaleLean manufacturingCapacity planning

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