What is safety stock?

In words: work out how much you would sell in a bad case, with the busiest days and the slowest delivery, then subtract what you expect to sell in a normal case. The difference is your cushion.

A shop sells cases of bottled water. On a normal day it sells 10 cases, and the supplier usually delivers in 3 days. In a heat wave it has sold as many as 15 cases a day, and one delivery took 5 days.

• Bad case: 15 x 5 = 75 cases
• Normal case: 10 x 3 = 30 cases
• Safety stock: 75 - 30 = 45 cases

Holding 45 cases protects against both problems at once. That may be more than the shop wants to tie up, which is a decision, not a rule. A shop that is happy to risk the occasional gap might hold only 20.

Safety stock costs money. Every case in the buffer is cash sitting on a shelf, so a bigger cushion means fewer stock-outs but more risk of overstock. Set it higher for products customers will not wait for, such as bread, water and gas, and lower for items people will happily order.

• Using one number for every product. Fast sellers with unreliable suppliers need more than slow sellers with reliable ones.
• Never updating it. Demand changes with seasons, holidays and new competitors.
• Counting it as sellable. Safety stock is part of the reorder point, so when stock falls into it, order again straight away.

Each product in Shopkeepa has its own low-stock minimum. If you set it with a cushion in mind, you get one reminder when the product crosses it, and the restock list then shows what to order.