Safety Stock Calculator
Quick reference service level to z-score conversion:
99.9% service level = 3.49 z-score
99% service level = 2.33 z-score
97% service level = 1.88 z-score
95% service level = 1.65 z-score
91% service level = 1.34 z-score
Safety Stock FormulaThere are several methods to establish a safety stock level. Below are three approaches an organizations may decide to use to determine their safety stock level. The first approach is the most basic and doesn't quite confront risk of a stock out, the last is the more complex, but attempts to mitigate this risk.
The most basic SSL:
SSL = avg LT * avg D
avg D is the average demand of that product
Approach number two is a more standard Safety Stock Level that seeks to minimize risk of a stock-out:
SSL = Z × σLT × avg Dwhere,
Z is the desired service level
σLT is the standard deviation of lead time
D avg is demand average
Approach number three (below) is a little more complex; it takes into consideration Norm's Inverse, but here we use a factor that provides an approximate equivalent.
SSL = [[(LT × σD^2) + (D avg × .92^2)]^1/2] × Zwhere,
LT is the average Lead Time from order placement to receipt
σD is Demand Standard Deviation
avg D is demand average
.92 is squared and allows us to achieve a similar result to what we would get if we used Norm's Inverse
Z is the desired service level (also known as fill rate)
If you need a calculator to determine your Lead Time Standard Deviation or need more information on what standard deviation is, visit Standard Deviation Calculator and the site walks you through the steps as well as provides a calculator.