You need to plot the distribution for the lead time demand and see where is the 95% line (suppose the service level is 95%). The left side of the curve to that line will be the safety stock. An easier method is to use normal approximation. For example, if the distribution is Possion with a mean λ, then use an approximate normal distribution of mean=λ and std dev=√λ. Then use this normal distribution to find safety stock.
Thank you for the clear explanation. Well appreciated 😊
Can you kindly post a video of the safety stock calculation when the demand pattern doesn’t follow the normal distribution
You need to plot the distribution for the lead time demand and see where is the 95% line (suppose the service level is 95%). The left side of the curve to that line will be the safety stock. An easier method is to use normal approximation. For example, if the distribution is Possion with a mean λ, then use an approximate normal distribution of mean=λ and std dev=√λ. Then use this normal distribution to find safety stock.