Free tool
Safety stock and reorder point
Size the buffer that protects your service level without tying up cash, and get the reorder point that goes with it. Both the statistical and the max-usage method.
Nothing you type is sent anywhere — every figure is worked out in your browser.
How the buffer is sized
Two accepted methods, shown side by side, because they answer slightly different questions and people argue about which is right.
Statistical method. Treats demand and lead time as independent sources of variation
and sizes the buffer for the service level you pick:
SS = Z × √( LT × σd² + d² × σLT² )
where Z comes from the service level (95% is 1.65), d is average
daily usage and LT is average lead time in days. This is the one to use when you
have real history.
Max-usage method. The old rule of thumb:
SS = (max usage × max lead time) − (avg usage × avg lead time).
It ignores probability and covers the worst case, so it almost always returns a bigger number.
Useful when you have no data, expensive when you have.
Reorder point is the same either way:
ROP = (avg daily usage × avg lead time) + safety stock. The figure at the
top uses the statistical safety stock.
The service level here is a cycle service level — the chance of not running out during any one replenishment cycle. It is not the same as the fill rate you quote a customer, and it is not an annual figure.
None of this survives an inaccurate stock figure. If the system says 400 and the rack holds 340, the maths above is decoration.
Where to go next
Every formula on this page assumes the stock figure it starts from is true. That assumption is usually where it falls down.
Capability
Stock control software
Stock that moves as the shop floor books material, not at month end when it is too late to act on.
Capability
Works order software
Material committed to jobs the moment the order is raised, so free stock means free.
Capability
Production planning software
Demand, lead time and capacity in one view rather than three spreadsheets.
A reorder point is only as good as the stock figure behind it
Book a 30 minute call and we will look at how accurate your free stock really is before you retune the buffers.
