Safety stock

Demand is never exactly what you forecast and a supplier is not always on time, so you keep a cushion of extra stock that you normally don't touch. It is what lets a busy week or a late delivery pass without empty shelves and lost sales. That cushion is called safety stock.

A simple way to size it: take your highest daily sales and your longest realistic supplier lead time and multiply them, then subtract average daily sales times average lead time. The difference is the cushion that covers a busy period combined with a slow delivery. Statisticians use a finer formula based on how much demand varies; for a small business the simple one is a sensible start.

More safety stock means fewer stock-outs and more money sitting on the shelf. Hold more for products that sell fast, are hard to replace or come from a slow or unreliable supplier, and less for slow sellers you can restock within days.