10 Ways to Calculate Safety Stock
The Simple Method: Safety stock is calculated by multiplying the average daily demand by the lead time in days.
The Normal Distribution Method: Safety stock is calculated using statistical methods that take into account the standard deviation of demand and lead time.
The Service Level Method: Safety stock is calculated using a target service level, which is the percentage of demand that must be met.
The Reorder Point Method: Safety stock is calculated by determining the reorder point, which is the level of inventory at which a new order must be placed.
The Economic Order Quantity (EOQ) Method: Safety stock is calculated as part of the EOQ model, which is a way to determine the optimal order quantity to minimize total inventory costs.
The Silver-Meal Method: Safety stock is calculated using a combination of the EOQ and reorder point methods.
The Newsvendor Model: Safety stock is calculated using a model that takes into account the costs of stockouts and overstocking.
The Beta Distribution Method: Safety stock is calculated using statistical methods that take into account the skewness and kurtosis of demand.
The Safety Stock Optimization Method: Safety stock is calculated using mathematical optimization techniques to find the optimal level of inventory.
The Monte Carlo Simulation Method: Safety stock is calculated using a computer simulation technique to model the variability of demand and lead time.
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