We can define safety stock as an extra quantity of a product which is stored in the warehouse to prevent an out-of-stock situation.
Safety stock is sometimes known as buffer stock as it comes in hanndy when the sales of an item are greater than planned or the supplier is unable to deliver additional units at the expected time.
Formula to calculate safety stock.
Example:
It takes about 40 days to get the processed fish to nairobi. The fishmonger sells about 15 fish a day , but on good days sales can go as high as 25. Unfortunately, in Baringo, they have heavy rains so the roads are not always reliable, which sometimes results in longer lead times, up to 55 days. Calculate the safety stock.
Therefore, the safety stock required is 775 fish.
