Method and assumptions
This maximum-average method is simple and conservative. It is useful when detailed demand distributions are unavailable but reliable peak observations exist.
Safety stock = maximum daily sales × maximum lead time - average daily sales × average lead time. Reorder point adds average lead-time demand.
Worked scenario
Enter average and plausible peak daily demand together with average and plausible maximum lead time for one SKU. The maximum-average method turns the difference between a stressed lead-time demand and normal lead-time demand into a visible buffer. Compare the result with service and cash objectives.
How to interpret the result
The method is transparent but sensitive to the selected maxima. A one-off shutdown can create excessive stock if treated as a permanent maximum. Use reviewed operating observations, name exceptional risk scenarios separately and remove temporary buffers when the risk expires.
Input reference
- Average daily unit sales
- Example default: 20
- Maximum daily unit sales
- Example default: 35
- Average lead time (days)
- Example default: 25
- Maximum lead time (days)
- Example default: 40
Common mistakes
- Using a record peak caused by an exceptional event forever.
- Combining demand and lead-time data from different SKUs or lanes.
- Adding another hidden buffer after calculating safety stock.
Before using the result
- Review peak observations and remove one-off anomalies.
- Compare carrying cost with the stockout risk protected.
- Track actual service level and revise the policy.
Questions to check before deciding
Should one exceptional sales spike be used?
Only when it represents a plausible future condition. Otherwise use a reviewed service-level method.
Is supplier production time included in lead time?
Include every day from order placement until inventory becomes sellable, including receiving delays.
Independent calculator. Not affiliated with or endorsed by the platforms mentioned.