Inventory Management Safety Stock Calculation and Control

Optimize your Supply Chain Safety Stock. Simple to Advanced Methods. Reduce Costs and Risk in your Business Operations


  • High School Maths (Age 17 ish)
  • Basic Microsoft Excel
  • A desire to save a ton of money through your robust inventory management!
  • High tolerance for dubious humour


This MBA style course prepares and empowers you to calculate and control your Safety Stock. A crucial area of Inventory Management.

The eternal question: How to balance the risk of stock-outs with the quantity of safety stock inventory held?…

We cover 3 methods to calculate your Safety Stock – from super simple to advanced statistics:

Method 1: Number of Days of Safety – A fast and very basic method to get a quick decision

Method 2: HiHi-AvAv (my own name for a very established method 😉  Finding the difference between our high “Lead Time Demand” and the average to determine the level of cover we want from periods of high demand during a slow replenishment lead time.

Method 3 : Statistical Method – The most rigorous method. We model our “Lead Time Demand” as a “Normal Distribution”, determine our desired “Service Level” (acceptable risk of a stockout) and use a little help from some excel formulas to calculate our required Safety Stock and Re-Order Point quantity.

Course Sections:

1. Inventory Control Introduction

2. Safety Stock Background

3. Inventory Dynamics

4. Simple Safety Stock Calculations

5. Calculating Safety Stock using Statistics

6. Getting Your Data

7. Assumptions and Limitations of the Statistical Method

8. Fixed Lead Time, Variable Demand: Method 3 Continued

9. Variable Lead Time and Demand: Method 3 Continued

10. Choosing your Service Level – Your Tolerance for Risk

11. Probability of a Stockout Over Time – Calculating Risk

12. Optimizing Safety Stock Levels

13. Conclusion

14. Bonus and Appendix

This course is for dedicated operations manager, the ambitious procurement professionals, the striving logistics supervisors, hands-on production planners and the practical business optimization analysts.

  • Remove the guesswork and add structure to your crucial safety stock decisions.
  • Take control of your inventory management to have and “impact” and “improve” your business operations – manufacturing, services, industrial operations and production.
  • Equip yourself to take a new leading role in your workplace – improving your processes, systems & business / organization.
  • Quantify your risk, calculate your inventory requirements and articulate your method – removing the guesswork and fearful overstocking

Downloadable Summary PDF Documents  – throughout the course

Almost all businesses have inventory: retail stores, factories, hospitals, hotels, car repair, warehousing, logistics and more – this means we all have to decide how much to hold and when to place an order from the suppliers for more. Place the order too late and, with a little extra demand than usual, you might stockout! Carry too much inventory and you pay for it in holding and financing costs every day, quietly sucking the profit from your business and crippling your cashflow and investment opportunities.

Having enough stock available whilst minimising costs and risk is the fundamental balance that can determine your business’s success. Getting a strong control and continuously improving your business operations is essential to remain competitive, improving profitability, improving customer experience and customer satisfaction, reducing costs and improving delivery.

Without a solid grasp of safety stock and methods of calculation; no operations manager, can competently or confidently manage their risk without excessive costs.

Be the one bringing clarity and structure to this most crucial decision!

Specific Topics Covered in the Course:

  • Why we need Safety Stock
  • Consequences of Stockouts
  • Costs of Inventory
  • Inventory Dynamics
  • Quick Calculations of Safety Stock
  • Rigorous Statistical Method to calculate Safety Stock
  • How to Model your “Lead Time Demand”
  • How to Determine your own desired “Service Level”
  • What the Probability of having a Stockout in a given period of time
  • How we can Reduce our Need for Safety Stock
  • Alternatives to holding Safety Stock

Take control! Boost your career and your business!  Start learning today!

Course Content

Inventory Control Introduction
Safety Stock Supply Chain Background
Inventory Dynamics
Simple Safety Stock Calculations – Simple Inventory Control
Calculating Safety Stock using Statistics
Getting Your Data – Finding your Mean and Standard Deviation
Assumptions and Limitations of the Statistical Method
Fixed Lead Time, Variable Demand: Method 3 continued
Variable Lead Time and Demand: Method 3 continued
Choosing your Service Level – Your Tolerance for Risk
Probability of a Stockout Over Time – Calculating Risk
Optimizing Safety Stock Levels – Inventory Management
Bonus and Appendix
Inventory Management: Safety Stock Calculation and Control
Inventory Management Safety Stock Calculation and Control
This course includes:


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