How to Calculate the Safetystock

This is a very common question and can be answered in many ways.
The most used, generally accepted formula is
However, this equation has some shortcomings and issues:

• The servicelevel is the so-called internal servicelevel.
  It is related to the chance or getting out of stock, and not the chance of a customer getting his order supplied from stock.
• The formula assumes that the demand for an item has a normal distribution. This wont be correct in many cases.
• The formula does not take into account the number of orders, or the quantity inside these orders. Customers may order certain quantities more often then other quantities, based on the packaging or application.

For these reasons, ABCstock uses an alternative, more advanced way of calculating the safetystock inside ABCstock.
By using Artifical Intelligenge Simulation techniques we use the actual historical salesorders to determine the relation between safetystocklevel and the real servicelevel to be achieved for customers.

The above image is created for every item, showing the relation between the safetystock at the x-axis, and the achieved customer external servicelevel on the y-axis.
ABCstock automatically identifies certain steps in this level, caused by repeating quantities and order-patterns.

Would you like to test our AI-calculation? Download this template Excelsheet, enter your Item and Sales/Requirement data for maximum 100 items, and mail it back to us. We will do the calculation for you.