🛡️ Understanding Safety Stock
Safety Stock is the inventory buffer Optiply calculates to protect your business against unexpected events. It is the extra stock you hold on top of your expected sales forecast.
While the Forecast covers what you expect to sell, the Safety Stock covers the uncertainty—ensuring you don't go out of stock when things don't go exactly according to plan.
Why Do You Need Safety Stock?
This buffer is essential to react to two main types of future risks:
Demand Spikes: A sudden, unexpected peak in customer sales.
Supply Delays: A new delivery arriving later than the scheduled Lead Time.
How It Is Calculated
Optiply determines the optimal Safety Stock level based on three specific variables:
Sales Variability (Demand Uncertainty):
If a product sells 5 units every single day (low variance), the safety stock can be low.
If a product sells 0 today and 50 tomorrow (high variance), the safety stock must be high to absorb that shock.
Supplier Reliability (Supply Uncertainty):
If a supplier always delivers on time, you need less buffer.
If a supplier is frequently late or unreliable, Optiply increases the buffer to bridge the gap during potential delays.
Product Category (Service Level):
Your desired Service Level (e.g., 99% for A-items vs. 90% for C-items) directly dictates how much "insurance" stock you hold.
Examples
Scenario | Characteristics | Resulting Safety Stock |
The Stable Best-Seller | Category A product + Reliable Supplier + Consistent daily sales. | Low. The risk is minimal, so Optiply advises a lean inventory. |
The Risky Item | Highly variable sales history + Unreliable Supplier. | High. Optiply calculates a large buffer to ensure availability despite the risks. |
Can I Adjust the Safety Stock?
You cannot type in a specific number for Safety Stock manually (e.g., "I want 5 units"). Instead, you influence it by adjusting the Service Level:
Increase Service Level: Tells Optiply you want fewer stockouts. → Safety Stock Increases.
Decrease Service Level: Tells Optiply you accept more risk. → Safety Stock Decreases.
❓ Frequently Asked Questions (FAQs)
Is Safety Stock the same as Minimum Stock?
No.
Safety Stock: A dynamic, calculated buffer based on risk and forecast.
Minimum Stock: A hard, manual floor you set yourself (e.g., "Always keep at least 5"). Optiply uses the higher of the two when calculating advice.
Why is my Safety Stock so high for a slow mover?
If a slow mover has erratic demand (e.g., it sells nothing for weeks and then suddenly sells 10), the mathematical variance is high. Optiply calculates a high safety stock to ensure you can fulfil that sudden order of 10.
Does the Lead Time affect Safety Stock?
Yes. A longer lead time exposes you to risk for a longer period. Additionally, if the variance in lead time is high (the supplier is unpredictable), the Safety Stock increases significantly.
How can I lower my Safety Stock?
You can lower the Safety Stock by decreasing the Service Level for the product. This tells Optiply you are willing to accept a slightly higher risk of stockouts in exchange for holding less capital in buffer inventory.