Safety stock
Safety stock is buffer inventory held above expected demand to protect against stockouts from demand spikes or supplier delays. A common formula is (max daily sales × max lead time) − (average daily sales × average lead time); statistical methods instead size it from a target service level and the standard deviation of lead-time demand.
How it's calculated
The simple max-minus-average method captures the worst-case gap between demand and supply:
Safety stock = (max daily sales × max lead time) − (average daily sales × average lead time)
The statistical method instead uses Z × σ(demand) × √(lead time), where Z is set by your target service level (95% ≈ 1.65) and σ is the standard deviation of demand.
Why it matters
Safety stock is the cushion that absorbs a sudden sales spike or a late supplier shipment without leaving customers empty-handed. Sizing it is a deliberate trade-off: a higher service level means fewer stockouts but more cash tied up. On Shopify, right-sized safety stock per SKU keeps your best sellers available without bloating your holding costs.
Track this automatically
Logistified calculates and monitors metrics like this across your whole Shopify catalog and turns them into reorder alerts and purchase orders.