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How to Calculate Safety Stocks

Updated

Details about determining safety stock levels and setting within the Manifest’s WMS.

Determining Safety Stock Levels

To calculate a proper safety stock level, you need to calculate the total lead time from the time you submit a PO to your manufacturer for new inventory through the time Manifest will complete the receiving process in our warehouse and use this lead time figure against your sales velocity per SKU.

  1. First, assess your Total Lead Time, counting in expected calendar days it takes for each of the below:
    1. Production Lead Time (expected # days from when you submit a PO to manufacturer until they’re ready to be shipped)
    2. Transit Lead Time (expected # days to ship from manufacturer to Manifest)
    3. Manifest Receiving Lead Time (*defaulted to 5 calendar days, assume compliant ASNs and a 3 business day receive, buffering for weekend days)
  2. In Shopify, find the Average Sales Velocity for this SKU for units sold per calendar day:
    1. We recommend using a 90 day time period as a benchmark
    2. You should adjust this according to forward-looking forecasts (up or down)!
  3. Choose a “Days on Hand Desired” for Safety Stock
    1. We recommend 15 days or more as a safety stock level for each SKU
  4. Calculate the Safety Stock Alert quantity

Example:

  • Production Lead Time: 10 calendar days
  • Transit Lead Time: 5 calendar days
  • Manifest Receiving Lead Time: 5 calendar days
  • “Days on Hand Desired” for Safety Stock: 15 calendar days
  • Average Sales Velocity (from your store, last 90 days): 15 units per day
  • Your total lead time = (10 + 5 + 5) = 20 calendar days
  • Your preferred “Days on Hand Desired” for safety stock = 15 calendar days
  • Your average sales velocity = 15 units per day

To Determine Your Safety Stock Alert quantity:

(20 days lead time + 15 days “days on hand desired”) = 35 days x 15 units per day = 525

You should set your Safety Stock Alert to 525 units for this SKU and re-order with your manufacturer as soon as you’re alerted to prevent any out of stock issues with your end customers!

Setting Safety Stock Alerts in Manifest’s WMS

To set reorder levels in the WMS:

 

And to set email notifications for low stock alerts:

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