Why Safety Stock Is Broken in Most Organizations

(And What You Can Do About It)

Let’s be honest. For all the time we spend calculating safety stock, tweaking service levels, and reviewing dashboards, we still miss the mark far too often.

You’ve probably seen it firsthand:

• Stockouts on your best sellers—again.
• Warehouses full of slow movers you can’t seem to clear.
• A safety stock “model” that hasn’t been updated since your last ERP upgrade.

It’s not a people problem. It’s a systems and assumptions problem. The world has changed, but most safety stock practices haven’t. Let’s explain why it’s broken—and how you can fix it

The World Changed. Your Safety Stock Didn’t.

Most safety stock approaches are built on a few shaky pillars: average demand, average lead time, and a single service level target for all SKUs. In a perfect world, that might be fine. But we don’t live in that world.

Today’s environment includes:

• Constant shifts in customer behavior.
• Unreliable transportation networks.
• Lead time fluctuations

And yet, many companies are still using static formulas built for stability, not volatility.

What to do instead:

• Recalculate safety stock dynamically—weekly or monthly—based on actual demand volatility and supplier performance.
• Segment your SKUs. Give your A-level, fast movers a different safety stock policy than your long-tail or EOL (end-of-life) products.
• Match safety stock to lifecycle stage. You’ll need more buffer for NPI (new product introduction), and less as products sunset

2. Your Forecast Has Blind Spots—and Your Safety Stock Is Flying Blind, Too

Safety stock is supposed to protect you from forecast error. But what happens when the forecast is wrong to begin with or when no one measures how inaccurate it is?

Too often, we see:

• Sales-driven forecasts with built-in optimism (hello, bias).
• Point forecasts that ignore confidence ranges.
• A total lack of visibility into CoV (coefficient of variation), MAPE (mean absolute percentage error), or historical volatility.

This results in safety stocks being built on shaky forecasts and the forecast getting even shakier

What to do instead:

• Switch to probabilistic forecasting that shows a range, not just a single number.
• Track error metrics like MAPE and bias and feed those directly into your safety stock models.
• Bring your forecast owners and planners together monthly to ask:
  • What changed?
  • Where did we go wrong?
  • What’s new?

3. Planning Says One Thing, Execution Does Another

Even with the perfect safety stock number on paper, it won’t help if your execution reality looks completely different.

Here’s what usually happens:

• Planners assume a 30-day lead time. In reality? It’s been bouncing between 18 and 45 days.
• Procurement creates shadow buffers “just in case,” but they’re off the radar.
• No one goes back to adjust the plan when things go sideways.

When your buffers don’t reflect how your supply chain behaves, the safety stocks stop protecting you.

What to do instead:

• Use actual lead time distributions, not just averages, in your buffer models.
• Build feedback loops from your TMS (Transportation Management System) and WMS (Warehouse Management System) into your planning process.
• Monitor how often you dip into safety stock and why. If it’s routine, your plan is outdated or your execution is off.

4. You're Paying the Price but You Just Can’t See It

Broken safety stock doesn’t just cause operational headaches. It quietly eats into your bottom line.

Think about it:

• Inventory carrying costs go up—sometimes millions in working capital stuck in places you don’t need it
• Stockouts lead to expediting, backorders, or lost revenue.
• E&O (excess and obsolete) piles up, and suddenly you’re writing off product you thought was “safe.”

What's worse is that no one owns this inventory. It becomes a shared problem where no one is accountable for it

What to do instead:

• Run a cost-to-serve analysis. Understand the trade-offs between service, cost, and buffer levels at the SKU level.
• Assign ownership. Set planners or regional teams' KPIs tied to safety stock effectiveness like service-adjusted inventory turns.
• Track the hidden costs: expedited spend, customer penalties, E&O write-offs

So… What Does “Good” Look Like?

A strong safety stock strategy isn’t about having more or less inventory. It’s about having the right inventory in the right place at the right time. To do that, your safety stock policies need to be:

• Dynamic – Regularly updated as demand and supply conditions change.
• Segmented – Customized by SKU type, volatility, and importance.
• Grounded in Reality – Tied to what’s happening on the ground, not what should be happening in theory.
• Financially Visible – Linked to cost, margin, and customer experience; not just inventory turns.

Want to Know If Your Safety Stock Is Working?

Here are five quick questions to ask your team:

1. When was the last time we updated our safety stock policies?
2. Are we using forecast error and lead time variability as actual inputs, or just relying on averages?
3. How much inventory do we carry “just in case” without visibility?
4. What’s our expedited spend as a percentage of total logistics cost?
5. Who owns safety stock performance? Is it by region, by product, or by planner?

You might not love the answers, but they’ll give you a roadmap to improve your inventory holdings.

Let’s Fix It.

Safety stock is too important to treat as a black box. It’s time to move from “set it and forget it” to “monitor, adjust, and align.”

Whether you start with better forecasting, product segmentation, or simply clearer ownership, every step gets you closer to a supply chain that runs lean without running blind.