Purchasing & forecasting · safety stock

YOU STOCK FOR THE TAIL, NOT THE AVERAGE

SS = z · σ · √ L    ·   ROP = μL + SS

The curve is exact: demand accumulated over the five-day supplier lead time, mean μL = 500 units, spread σ√L ≈ 67. Below it, one simulated realisation runs the reorder rule against that distribution — orders fire the moment stock crosses the reorder point, and each arrival lands somewhere near the safety-stock line. The buffer is not sized by how much you sell but by how badly demand can surprise you; at z = 1.645 about one cycle in twenty still runs dry. Because the cushion grows with the square root of lead time, a shorter supply chain beats a bigger warehouse.