Safety inventory protects against inventory uncertainty by ensuring there is enough product available to maintain desired service levels. Many factors contribute to inventory uncertainty, but three main elements give rise to the differences between planned inventory and actual inventory levels: demand deviations, supply deviations, and inventory accuracy. Traditionally, the analysis of safety inventory levels has focused primarily on demand and demand uncertainty, while supply uncertainty and inventory accuracy aren't typically addressed explicitly in the analysis of safety inventory. This paper zeroes in on actual computation techniques to determine safety inventory levels. It explains a new one that addresses inventory uncertainty and compares it with common calculation techniques.
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