ECOMMERCE TOOL / 51
Buffer the uncertainty.
Keep stock available.
Estimate safety stock and reorder point using average demand, peak demand, average lead time, and the longest recent lead time.
This planning formula is deliberately conservative. It does not model service levels, seasonality, promotions, or supplier minimum order quantities.
Advertisement
QUICK ANSWERS
Why use maximum values?
Using recent peak demand and the longest observed lead time creates a simple buffer for variability. It may overstock products with highly seasonal demand.
How is this different from reorder point?
Safety stock is the buffer. Reorder point combines expected lead-time demand and that buffer.