The short answer
Your reorder point is when to order. Safety stock is the cushion inside it. Safety stock is one part of the reorder point, not a separate number you add on top.
Reorder point
Reorder point = (average daily sales × lead time in days) + safety stock
It's the stock level that tells you to place an order. When what you have on hand, plus anything already on order, falls to this number, it's time to reorder.
Safety stock
Safety stock = Z × daily sales variability × √lead time
It's the extra stock you hold for the days things don't go to plan: sales run faster than usual, or the delivery runs late. In a perfect world you'd never touch it.
How they fit together
Say you sell 5 units a day, your supplier takes 14 days, and you hold 13 units of safety stock.
- You'll sell about 70 units while you wait for the delivery.
- Add the 13 units of safety stock, and your reorder point is 83.
- If everything goes to plan, the delivery lands just as you get down to your last 13 units.
Common mix-ups
- Setting the reorder point equal to safety stock. You'd only order once you're into your cushion, then run out while you wait.
- Adding safety stock twice, once to the reorder point and again to the order quantity. You'll slowly overstock.
- Using one flat safety stock for everything. Fast, unpredictable sellers need more; slow, steady ones need less.
Which one should you look at?
Day to day, watch the reorder point. Adjust safety stock when you're running out too often (raise it) or have too much cash sitting on shelves (lower it). The reorder point guide walks through both with a worked example.
How Posto helps
Posto calculates both for every product and shows them side by side in each recommendation, with the service level that sets the safety stock. Change the service level, and you can see exactly how the cushion and the reorder point move.