Calculate safety stock, reorder points, and EOQ using statistical formulas. What-if analysis across service levels. Multi-SKU mode for up to 10 products.
Daily demand variability
Lead time variability in days
Z-score: 1.65 — probability of not stocking out during lead time
ROP = (D × LT) + Safety Stock
SS = Z × √(LT × σ_D² + D² × σ_LT²)
EOQ = √(2 × Annual Demand × S / H)
Blue area = inventory on hand. Dashed lines show reorder point and safety stock.
The simplest reorder point formula (ROP = Demand × Lead Time) assumes perfect, predictable conditions. In reality, daily demand fluctuates, suppliers deliver late, and customs delays happen. Without safety stock, even a single unexpected demand spike or lead time extension causes a stockout. Safety stock is your statistical buffer against these uncertainties.
The correct formula accounts for variability in both demand and lead time using their standard deviations. Companies that use the simplified formula without safety stock typically experience 3–5x more stockouts than those using the full statistical calculation, according to supply chain research.
Economic Order Quantity (EOQ) minimizes the sum of ordering costs and holding costs. Every time you place an order, you incur fixed costs: purchasing time, receiving, processing, and supplier minimum charges. Every unit you hold in inventory costs money: capital, space, insurance, and obsolescence risk.
EOQ = √(2 × Annual Demand × S / H), where S is the cost per order and H is the annual holding cost per unit. Doubling your order cost pushes EOQ up (order less frequently in larger batches). Doubling holding cost pushes EOQ down (order more frequently in smaller batches). EOQ is the mathematically optimal balance point.
Moving from 95% to 99% service level requires significantly more safety stock because the z-score increases non-linearly. Going from 95% to 99% (z = 1.65 to 2.33) adds 41% more safety stock. Going from 99% to 99.5% (z = 2.33 to 2.58) adds only 11% more — but that last half-percent requires proportionally expensive inventory investment.
Use the What-If Analysis tab to visualize this trade-off for your specific demand and lead time parameters. Most businesses find the 95–98% range offers the best cost-to-availability balance. Reserve 99%+ service levels for high-value, critical-path SKUs where stockouts have severe downstream consequences.
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Odoo Inventory automatically calculates and triggers reorder points based on your rules. No spreadsheets, no manual monitoring. ECOSIRE implements it in weeks, not months.