Frequently Asked Questions
What is safety stock?
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Safety stock is the extra inventory kept on hand to protect against unexpected demand spikes or supplier delays. It acts as a buffer to ensure you can continue fulfilling orders even when conditions deviate from forecasts. Every e-commerce store should maintain some level of safety stock for their best-selling products.
How much safety stock should I keep?
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The ideal safety stock depends on your demand variability, lead time variability, and desired service level. A common formula is: Safety Stock = (Max Daily Sales x Max Lead Time) - (Avg Daily Sales x Avg Lead Time). Products with higher demand volatility or less reliable suppliers need more safety stock.
What happens if I carry too much or too little safety stock?
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Too little safety stock leads to stockouts, lost sales, and unhappy customers. Too much safety stock ties up capital and increases carrying costs (storage, insurance, depreciation). The goal is finding the balance that minimizes total cost while maintaining your target service level — typically 95-99% for top sellers.