{"id":12621,"date":"2021-08-26T15:40:29","date_gmt":"2021-08-26T22:40:29","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dcl-v3\/?p=12621"},"modified":"2024-01-02T10:26:28","modified_gmt":"2024-01-02T18:26:28","slug":"safety-stock","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/","title":{"rendered":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts"},"content":{"rendered":"

The reality for any ecommerce business is that supply chain problems are bound to happen, and you need to be prepared when they do. So how do you protect your business against unexpected problems without frustrating customers and compromising your reputation? This is where calculating safety stock factors in. Safety stock is an inventory formula retailers use to determine the emergency stock \u2013 the extra stock of products they need to have in case of unforeseen circumstances that can put them on the verge of selling out. You want to have enough products to help you deal with supply chain problems that arise. Some examples are breakdowns of production machinery, any weather-related troubles affecting your stock or deliveries, unpredicted surges in your product\u2019s popularity leaving your supplier unable to match demands. At the same time, you don\u2019t want too much excess inventory that you end up with the carrying costs that are too high for your sales level. While this sounds fairly straightforward, the trick is to know how to calculate inventory in order to determine the optimal stocking level. It is important to remember that the sales don\u2019t only have to cover the sold products\u2019 own carrying costs, but the carrying costs of the safety stock as well.<\/span><\/p>\n

 <\/p>\n

Why is Safety Stock Important?<\/span><\/p>\n

The purpose of safety stock is to avoid stockouts, whereby a product can\u2019t be supplied for sale, its delivery after purchase is unreasonably held up, or a component isn\u2019t available during manufacturing. Stockouts negatively affect a business in several ways.<\/span><\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

The Downside of Safety Stock<\/span><\/p>\n

While avoiding stockouts is important, it should be pointed out that there are some downsides to holding safety stock as well.<\/span><\/p>\n

 <\/p>\n

Holding inventory costs money \u2013 both because the stock itself must be purchased, tying up capital \u2013 and because higher volumes of inventory require more warehouse space, as well as staff and other costs such as insurance.<\/span><\/p>\n

 <\/p>\n

Holding excess inventory can also lead to significant losses through wastage, as many types of inventory can spoil or devalue over time: foods, beverages and medicines all fall into this category. While others can break, go out of fashion, or become redundant. A company making toys or consumer electronics, for example, would need to carefully balance the risk of a potential stockout against the risk of holding excess inventory that never sells.<\/span><\/p>\n

 <\/p>\n

How do you Calculate Safety Stock?<\/span><\/p>\n

The appropriate amount of safety stock to keep on hand can be calculated with this formula:<\/span><\/p>\n

 <\/p>\n

Step 1: Average daily sales of product x average lead time = average safety stock<\/span><\/p>\n

Step 2: Maximum daily sales of product x maximum lead time = maximum safety stock<\/span><\/p>\n

Step 3: Step 2 result – Step 1 result = optimal safety stock<\/span><\/p>\n

Having an optimal amount of safety stock ensures you can address demand surges without inventory holding costs being too high. Make sure to periodically update your safety stock based on fluctuations in demand and supplier timelines.<\/span><\/p>\n

 <\/p>\n

What is a Good Safety Stock Level?<\/span><\/p>\n

A good safety stock level is the difference between a product’s maximum daily sales and its average daily sales, times the product’s average lead time. This provides enough spare units of a product to sell in the event of rapid demand fluctuation. Even the fastest lead times are usually two weeks, and you can\u2019t rely on that when you need products to sell right now.<\/span><\/p>\n

 <\/p>\n

Bottom Line<\/span><\/p>\n

As a business owner, you want to make sure you can ship customer orders on time and maximize sales while ensuring your supply chain processes are streamlined. Calculating the safety stock levels of all of your SKUs is a great way to get started. As a result, you will be able to minimize stockout scenarios, better utilize your warehouse space, improve demand forecasting, and keep up with seasonal trends. And when you\u2019re ready to grow your business, consider partnering up with a 3PL that takes care of safety stock for you.<\/span><\/p>\n

 <\/p>\n

Help with inventory management is one of the many benefits to working with a 3PL. If you are seeking logistics support we\u2019d love to hear from you. You can read <\/span>DCL\u2019s list of services<\/span><\/a> to learn more, or check out <\/span>the many companies we work with<\/span><\/a> to ensure great logistics support. <\/span>Send us a note<\/span><\/a> to connect about how we can help your company grow.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The reality for any ecommerce business is that supply chain problems are bound to happen, and you need to be prepared when they do. So how do you protect your business against unexpected problems without frustrating customers and compromising your reputation? This is where calculating safety stock factors in. Safety stock is an inventory formula […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[107],"tags":[],"class_list":["post-12621","post","type-post","status-publish","format-standard","hentry","category-inventory"],"acf":[],"yoast_head":"\nThe Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts | DCL Logistics<\/title>\n<meta name=\"description\" content=\"In ecommerce, safety stock is extra inventory held by a retailer or a manufacturer in case demand for a product suddenly increases unexpectedly.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts\" \/>\n<meta property=\"og:description\" content=\"In ecommerce, safety stock is extra inventory held by a retailer or a manufacturer in case demand for a product suddenly increases unexpectedly.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/\" \/>\n<meta property=\"og:site_name\" content=\"DCL Logistics\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/DCLLogistics\/\" \/>\n<meta property=\"article:published_time\" content=\"2021-08-26T22:40:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-01-02T18:26:28+00:00\" \/>\n<meta name=\"author\" content=\"Hadleigh Reid\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@dcl_logistics\" \/>\n<meta name=\"twitter:site\" content=\"@dcl_logistics\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Hadleigh Reid\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts | DCL Logistics","description":"In ecommerce, safety stock is extra inventory held by a retailer or a manufacturer in case demand for a product suddenly increases unexpectedly.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/","og_locale":"en_US","og_type":"article","og_title":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts","og_description":"In ecommerce, safety stock is extra inventory held by a retailer or a manufacturer in case demand for a product suddenly increases unexpectedly.","og_url":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/","og_site_name":"DCL Logistics","article_publisher":"https:\/\/www.facebook.com\/DCLLogistics\/","article_published_time":"2021-08-26T22:40:29+00:00","article_modified_time":"2024-01-02T18:26:28+00:00","author":"Hadleigh Reid","twitter_card":"summary_large_image","twitter_creator":"@dcl_logistics","twitter_site":"@dcl_logistics","twitter_misc":{"Written by":"Hadleigh Reid","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/#article","isPartOf":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/"},"author":{"name":"Hadleigh Reid","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#\/schema\/person\/da6717f42cf9f668559023de5ff93aa6"},"headline":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts","datePublished":"2021-08-26T22:40:29+00:00","dateModified":"2024-01-02T18:26:28+00:00","mainEntityOfPage":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/"},"wordCount":743,"commentCount":0,"publisher":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#organization"},"articleSection":["Inventory"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/","url":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/","name":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts | DCL Logistics","isPartOf":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#website"},"datePublished":"2021-08-26T22:40:29+00:00","dateModified":"2024-01-02T18:26:28+00:00","description":"In ecommerce, safety stock is extra inventory held by a retailer or a manufacturer in case demand for a product suddenly increases unexpectedly.","breadcrumb":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/inventory\/safety-stock\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/michaeljbrumm.com\/dcl-v3\/"},{"@type":"ListItem","position":2,"name":"The Benefits of Safety Stock for Ecommerce: More Than Just Avoiding Stockouts"}]},{"@type":"WebSite","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#website","url":"https:\/\/michaeljbrumm.com\/dcl-v3\/","name":"DCL Logistics","description":"Logistics and Fulfillment Experts","publisher":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/michaeljbrumm.com\/dcl-v3\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#organization","name":"DCL Logistics","url":"https:\/\/michaeljbrumm.com\/dcl-v3\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#\/schema\/logo\/image\/","url":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-content\/uploads\/2023\/05\/DCL-Icon-Transparent.png","contentUrl":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-content\/uploads\/2023\/05\/DCL-Icon-Transparent.png","width":153,"height":153,"caption":"DCL Logistics"},"image":{"@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/DCLLogistics\/","https:\/\/x.com\/dcl_logistics","https:\/\/www.linkedin.com\/company\/dcl\/"]},{"@type":"Person","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#\/schema\/person\/da6717f42cf9f668559023de5ff93aa6","name":"Hadleigh Reid","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/michaeljbrumm.com\/dcl-v3\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/c5013befad8eff04fe16ec86f138a6ce6ad76a1e7ead9470408af4a80a6e5da6?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/c5013befad8eff04fe16ec86f138a6ce6ad76a1e7ead9470408af4a80a6e5da6?s=96&d=mm&r=g","caption":"Hadleigh Reid"},"description":"Hadleigh is the Content Manager at DCL Logistics. He drives the content marketing strategy and writes articles to help ecommerce businesses understand the 3PL and fulfillment world and grow and improve their strategy. Feel free to reach out at hadleighr@dclcorp.com","url":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/author\/hadleigh\/"}]}},"_links":{"self":[{"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/posts\/12621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/comments?post=12621"}],"version-history":[{"count":0,"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/posts\/12621\/revisions"}],"wp:attachment":[{"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/media?parent=12621"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/categories?post=12621"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/michaeljbrumm.com\/dcl-v3\/wp-json\/wp\/v2\/tags?post=12621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}