Reorder point and safety stock calculator

Safety stock = z × √(lead time × daily sd² + daily sales² × lead time sd²)

• z comes from how safe you want to be: 1.28 for 90%, 1.64 for 95%, 1.96 for 97.5% and 2.33 for 99%.
• Daily sd is how much daily sales vary. From weekly sales it is the weekly standard deviation divided by √7, which assumes one week does not affect the next.
• Lead time sd is how many days your supplier's lead time varies by, give or take.

Many calculators only use the first half, z × daily sd × √lead time. That is the same formula with a supplier who is never late. For most small brands the supplier is the bigger risk, so leaving it out gives a buffer that is too small.

"95% safe" means about 19 out of every 20 order cycles reach the next delivery without running out. It is not a promise about any one product or month.

A UK brand sells 140 units a week, which is 20 a day, and daily sales vary by 6 units. Its supplier takes 16 days from order to stock on the shelf. The brand wants to be 95% safe.

Three days of supplier variation more than doubles the buffer. At £12 a unit landed, the 107 units of safety stock hold £1,284 of cash.

• Using production time as the lead time. Count everything from placing the order to having stock ready to sell: production, shipping, customs and goods-in.
• Ignoring late deliveries. A supplier who is sometimes a week late needs more buffer than most sales swings.
• Setting it once. Sales and lead times change. Recalculate when either moves, and before peak season.
• Going straight to 99%. The last few percent of safety cost the most stock, and that stock is cash on a shelf.
• Forgetting stock already on order. Compare your reorder point with stock on hand plus stock on the way.

This calculator does not work out an economic order quantity. Small sellers rarely know their cost per order, and the real limits are the supplier minimum and cash. To check the cash side, use the stock order calculator.

Safety stock is the buffer you hold for sales running faster or a delivery running late. The reorder point is the stock level at which you place the next order: the sales you expect during the lead time plus that safety stock.

A lot. Every extra day your supplier might be late is a day of sales you need to cover. In the worked example, a lead time that varies by 3 days more than doubles the buffer, from 40 to 107 units.

95% is a common starting point. Choose higher for best sellers where running out loses customers, and lower for slow or easy to replace lines. Each extra point of safety costs more stock than the last, so the step from 97.5% to 99% costs the most per point.

Whenever your sales rate or your supplier's lead time changes, and at least once a quarter. Recalculate before peak season, using the expected change in sales while you wait.

Use the sales rate you expect during the lead time, not the average for the year. Under Detailed, enter the expected change while you wait, for example 50% ahead of peak season. Lower it again once the season passes.

Safety stock is stock you paid for that sits on the shelf most of the time. Every unit is cash you cannot spend on ads, wages or the next order. The calculator shows that cash once you add your cost per unit.

Work one product at a time. Start with your best sellers, where running out costs the most, then move to the rest.