Safety Stock


Safety Stock

There are 10 variables that determine safety stock. You can view these by opening the safety stock simulator. Here we are going to focus on service level and deviation and what they mean for your product's safety stock.
Safety Stock Simulator

The Safety Stock Simulator shows you the 10 variables that are factored into safety stock.



Service Level

Service Level for individual products is determined by high-level managers. Knowing the service level is important for buyers because products with higher service levels require higher fill rates. Service level is an important factor of safety stock. Products with a higher service level will require more safety stock than if they were at a lower level.


Deviation

The deviation represents the range of the history from the average. 

For example, a product that is stable with history only ranging from 20-30 units per period (with multiple periods of history) will have a lower deviation. This means it will need less safety stock because it is stable and easier to predict.



A product that ranges from 20-200 per period will have a very large deviation. This product will need more safety stock since it is erratic and difficult to predict.


Product behavior can certainly change over time. If you feel that the product has become more stable in recent periods, you can edit history and include the recent periods. Your daily sales is a great tool to help you determine this. You don't always want to lower the deviation. Only when it is necessary. Those unstable erratic movers will need the higher deviation in order to calculate enough safety stock to cover for the uncertainty.

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