What is safety stock?

Safety stock is the buffer that protects you when reality differs from the average. The classic formula multiplies maximum daily usage by maximum lead time and subtracts average usage times average lead time. A practical working rule for small businesses: hold one to two days of average usage for stable items, three to five days for items where usage varies week to week, and a week or more for items with unreliable suppliers or high stockout cost. More variability in either usage or lead time means more safety stock. Where teams get this wrong: setting one safety stock policy for everything. Stable items with reliable suppliers don't need the same buffer as volatile ones, and over-buffering ties up cash. Safety stock should be reviewed when lead times change, suppliers change, or seasonality shifts the demand profile.