Safety stock is extra inventory held as a buffer against higher-than-expected demand or slower-than-expected supplier deliveries.
Two simple ways to size it: days of cover (average daily sales × buffer days), or the max–average method ((maximum daily sales × maximum lead time) − (average daily sales × average lead time)).
Too little causes stockouts; too much adds holding cost on every item.
FORMULA
Safety stock = (max daily sales × max lead time) − (average daily sales × average lead time)