Calculating safety stock and reorder point using safety stock journal

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Posted on by SupplyChainSpecial

I am trying to calculate my reorder point for my purchased item using the safety stock journal but I am running into issues with the standard deviation of issues per month.

safety stock formula = service level x standard deviation of demand x lead time

Reorder point formula = average demand per day x lead time + safety stock

My example is below

Average issues per month is 2,749.50 lbs, standard deviation of issues per month is 4,709.43 lbs, service level factor is 95%, and your lead time is 10 days, then your safety stock and reorder point are:

Safety Stock = 1.64 x 4,709.43 x 10 Safety Stock = 77,364.82 lbs

Reorder Point = (2,749.50 / 30) x 10 + 77,364.82 Reorder Point = 78,281.32 lbs

Having a reorder point of 78,281.32lbs is way to high when the monthly average is 2,749.50. Can someone help me where I am going wrong with the standard deviation of issues per month? I am grabbing all these numbers straight from the safety stock journal.

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Calculating safety stock and reorder point using safety stock journal

Your safety stock calculation uses the square root of the lead time, not the lead time value itself.

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