.webp)
You’re confident your stock levels are accurate. Customers are placing orders, everything seems smooth, and then... the dreaded email arrives.
"Hey, I just ordered this, but it's saying it's out of stock?"
Panic sets in. You double-check your records, refresh your dashboard, and suddenly realize, your inventory isn’t as accurate as you thought. Now, you have two options: try to fix it or send an awkward apology (and possibly lose the sale).
The reality? Too many Shopify stores run their inventory on hope and best guesses until it costs them in the form of lost revenue, missed upselling opportunities, and damaged brand reputation.
To avoid this, you need to maintain safety stock that goes beyond spreadsheets and last-minute guesswork.
This article explains the importance of maintaining safety stock, key challenges in managing it, and a Shopify app that can help.
What is Safety Stock?
Safety stock is the extra inventory that businesses keep on hand to protect against unexpected demand or supply chain disruptions.
It’s like a safety net that ensures product availability even when sales suddenly spike, a su
pplier delays a shipment, or production halts for some reason. This helps you avoid stock outs, which can frustrate customers and hurt sales.
The amount of safety stock depends on factors like how predictable demand is, lead times from suppliers, and how much risk you are willing to take.
Businesses rely on safety stock to
- Keep operations running smoothly despite supply chain fluctuations or inaccurate forecasts
- Reduce backorders, delays, and lost sales
- Protect against unexpected spikes in demand or vendor issues
- Balance between too much stock (high holding costs) and too little (stockouts and lost revenue)
Originally used in traditional retail and manufacturing, safety stock became essential in global supply chains. In e-commerce, its role has evolved due to fast-changing demand, shorter product life cycles, and customer expectations for quick delivery.
Why is Shopify Safety Stock Important for You?
Keeping extra inventory means tying up money, so why would a Shopify business invest in safety stock?
The answer is simple, it helps prevent lost sales, keeps customers happy, and ensures smooth operations even when things don’t go as planned.
Following are the benefits of maintaining Shopify safety stock
1. Preventing stockouts and keeping customers happy
Running out of stock means more support tickets, canceled orders, and higher marketing costs. Plus, customers don’t wait, they move on to competitors.
Sometimes, demand can spike unexpectedly due to a product going viral, a celebrity mention, or a shift in consumer behavior.
Take fidget spinners, for example. A few years ago, they became the hottest toy almost overnight. Stores that stocked up early made a fortune, while others struggled to keep up and missed out.
Having Shopify safety stock ensures you can continue fulfilling orders even if demand suddenly increases or your supplier delays shipments. This leads to higher customer loyalty, more positive reviews, and fewer lost sales.
2. Reducing overstocking and freeing up cash flow
On the other hand, keeping too much inventory in the name of safety stock isn’t the answer as it freezes your capital, increases storage costs, and leads to markdowns.
Safety stock helps you strike the right balance, keeping enough inventory to avoid stockouts while ensuring your cash isn’t locked up in excess stock. This way, you can free up cash flow to invest in marketing, product development, or expansion activities of your store.
In case you end up with excess stock for your subscription brand, here’s a super-helpful article for you.
3. Helps with quick exchanges
When customers need a different size, color, or version of the same product, having extra inventory allows you to offer fast exchanges instead of resorting to refunds.
Refunds can be costly and cut directly into your revenue, whereas exchanges keep the sale intact. Plus, quick and hassle-free exchanges improve the overall customer experience and encourage repeat purchases.
4. Gives you enough time to replenish inventory
Without safety stock, you’re at the mercy of your suppliers’ timelines. If you sell out unexpectedly, you might have to pay extra for rush shipping or leave customers waiting.
Having backup inventory gives you a buffer, ensuring you can reorder stock at a steady pace without disrupting sales or straining your cash flow.
5. Mitigates supply chain delays
Issues like supplier delays, port congestion, and raw material shortages can cause major disruptions if you don’t have a backup plan.
By maintaining safety stock, you can keep fulfilling orders even when your supply chain faces unexpected setbacks. This prevents lost revenue and keeps your business running smoothly despite external challenges.
Learn more about how to build supply chain resilience in this article.
How to Calculate Shopify Safety Stock?
To calculate your safety stock, use the following formula
Safety Stock = (Maximum Daily Usage × Maximum Lead Time) - (Average Daily Usage × Average Lead Time)
Here’s how to calculate each variable and put them into the formula
- Maximum daily usage: This refers to the highest number of units sold in a single day during a peak sales period. For example, if your Shopify store sells an average of 10 items per day but once sold 25 items on a particularly busy day (such as Black Friday), then your maximum daily usage is 25
- Maximum lead Time: This is the longest time it has taken for your supplier to deliver new stock. If your supplier usually takes 7 days to restock, but during holiday congestion it once took 14 days, then your maximum lead time is 14
- Average daily usage: This is the average number of units sold per day, calculated over a period of time. If your Shopify analytics show that you sell between 8 and 12 items daily, with an average of 10, then that’s your average daily usage
- Average lead time: This represents the usual time your supplier takes to deliver inventory. If your supplier typically delivers stock within 7 days, that would be your average lead time
Common Challenges in Maintaining Shopify Safety Stock (+ Practical Tips to Solve Them)
Maintaining safety stock can be tricky without the right data and tools in place. Here are some challenges you may face and ways to solve them
1. Data inaccuracies in lead time and demand forecasting
Safety stock relies heavily on accurate predictions of lead times and customer demand. If your data is outdated, incomplete, or based on flawed assumptions, it leads to wrong calculations of safety stock leading to either excessive stock or stockouts.
Factors like supplier delays, market trends, and seasonality make accurate forecasting even more difficult.
💡Solution: Regularly audit and update your demand forecasts. Work closely with suppliers for accurate lead times.
Eliminate the guesswork by using AI-powered inventory management tools like Prediko that use real-time sales data, historical growth trends, and seasonality to create demand plans. You can also update vendor lead times individually for different SKUs and products.
After you’ve set your safety stock levels, Prediko automatically incorporates this information into its replenishment recommendations.
2. Over-reliance on manual processes
Many small and mid-sized Shopify businesses still rely on spreadsheets and manual calculations to manage safety stock. This is slow, error-prone, and simply not scalable for growing brands. Manual methods don’t reflect real-time changes, leading to the risk of excess or insufficient safety stock units.
💡Solution: Switch to automated and smarter inventory software like Prediko to track inventory and trigger reorder alerts instantly based on your minimum days of cover. To calculate safety stock, just input your desired days of cover, and Prediko will factor it into the reorder suggestions.
3. Supplier delays and unpredictable lead times
Even with good forecasting, suppliers can throw a wrench in your plans with late deliveries or inconsistent timelines. This unpredictability makes it hard to maintain the right safety stock levels.
A product that normally takes 7 days to arrive might suddenly take 14 days due to festive delays, shortages, or increased demand.
💡Solution: Source from multiple vendors to spread the risk. If one supplier lags, others can pick up the slack. Negotiate clearer timelines and penalties for delays with suppliers, or offer incentives for reliability.
Increase safety stock for critical items with historically unreliable lead times, while keeping leaner buffers for stable suppliers.
4. Ignoring seasonality and market trends
Shopify stores that fail to adjust safety stock for peak seasons (e.g., Black Friday, holiday sales, or back-to-school shopping) often face either stockouts during peak periods or overstock during low-demand periods. Safety stock that doesn’t adapt to these demand patterns is either wasteful or insufficient.
💡Solution: Use historical sales data to predict seasonal trends and adjust safety stock accordingly. You should increase safety stock before peak seasons and gradually reduce stock after demand slows to avoid excess inventory.
Dive deeper and learn more about preparing your inventory and support team for peak periods like Black Friday in this article.
Best Practices for Safety Stock Management
Now that you know how to build your Shopify safety stock and what to keep in mind, here are some of the best practices for safety stock management
1. Regularly update safety stock levels based on sales trends
Your safety stock should not be a fixed number, it must evolve with your sales trends. If you’re using outdated stock consumption levels, your safety stock levels would be inaccurate; either too little or too much leading to overstocking or shortages.
Look at your historical sales data. Identify peak seasons, sudden demand surges, or slow-moving periods. Use tools like Prediko to automate demand forecasting, factoring in seasonality, growth trends, and historical sales for accurate demand planning.
For instance, if you sell outdoor gear and you see a 60% spike in tent sales during the summer. By analyzing past data, you can maintain higher safety stock before the season starts, avoiding stockouts and maximizing sales.
2. Collaborate with suppliers for flexible lead times
No matter how accurately you forecast demand, your inventory levels depend on how fast your suppliers can restock.
A supplier delay, even by a few days, can cause stockouts and lead to lost sales. Instead of just relying on forecasts, you must build supply chain resilience by working closely with suppliers to shorten or stabilize lead times.
A key strategy here is the dual-sourcing approach wherein you engage with two suppliers for a specific component
- Primary supplier: Your regular vendor with the best prices and bulk order capabilities
- Backup supplier: A secondary supplier who can provide limited restocks quickly at a slightly higher cost
Another tactic is negotiating better supplier terms, such as requesting suppliers to hold a buffer stock at their warehouse for urgent restocks, securing priority production slots to shorten manufacturing lead times, and using express shipping options when necessary to ensure timely deliveries.
3. Segment your inventory and monitor product lifecycle
Not all products should have the same safety stock levels. Some have steady, long-term demand (like basic home essentials), while others are trend-driven and quickly become obsolete (like seasonal fashion or tech accessories).
Maintaining safety stock for slow-moving products locks up capital and increases storage costs.
You can use ABC inventory analysis to manage this risk
- A-Items (High demand, Low stock): Fast-moving products where stockouts would be costly, keep more safety stock
- B-Items (Moderate demand): Keep a balanced safety stock level to maintain availability without excessive overstock
- C-Items (Low demand, Risk of obsolescence): Avoid excessive safety stock, order based on actual demand
Prediko automates ABC analysis by going beyond historical data, using predictive insights to identify trends and patterns. It helps determine optimal classification points for your A, B, and C categories, ensuring smarter safety stock decisions.
How Prediko Helps Shopify Stores Manage Safety Stock
Prediko is an AI-powered inventory planning and management tool designed specifically for Shopify stores. It helps you tackle safety stock management with a smart, data-driven approach.
Here’s how
1. Accurate demand forecasting
Prediko uses AI trained on extensive sales data across industries to predict future demand at the SKU, product, or category level.
You can analyze historical sales trends, seasonal patterns, and even promotional impacts to estimate how much safety stock you’ll need. Instead of relying on gut feelings or static formulas, you get dynamic forecasts that adjust to your store’s unique patterns, ensuring your safety stock buffers are just right.
2. Real-time inventory tracking
By syncing directly with your Shopify store, Prediko provides a live view of stock levels across multiple stores, warehouses, or even bundles.
This real-time visibility lets you see exactly when your inventory is dipping close to safety stock thresholds. Plus, you’re not guessing whether you’re covered, it flags at-risk SKUs instantly, so you can act before a stockout hits.
3. Automated replenishment alerts
Prediko doesn’t just track; it proactively nudges you with timely reorder alerts. These are specific to your lead times, current stock cover, and predicted demand, so you know precisely when and how much safety stock to replenish.
For Shopify merchants, this cuts out the manual guesswork, ensuring you restock critical items before they run dry, without over-ordering.
4. Set up safety stock across SKUs and raw materials
For stores with multiple locations, warehouses, or product variants, Prediko consolidates everything into one dashboard.
It lets you set safety stock rules per SKU, product, and even raw materials, adapting to different demand patterns, like high-turnover items needing bigger buffers or seasonal products requiring temporary boosts. This is super-helpful for Shopify Plus brands scaling up.
5. Purchase order management
Lastly, creating purchase orders with Prediko is also quick and seamlessly integrated into your workflows.
It generates recommendations based on your safety stock needs, lead times, and forecasted sales in just one click.
This means you will spend less time wrestling with spreadsheets and gain confidence that your POs align with actual requirements, keeping safety stock lean yet effective.
Maintain the Right Levels of Safety Stock with the Right Tools
Keeping the right amount of safety stock is all about balance, avoiding stockouts while not tying up too much cash.
With the right tools and strategies, Shopify businesses can tackle supply chain delays, inaccurate data, seasonality, and unpredictable lead times.
Prediko offers AI demand planning, real-time reorder recommendations, 1-click PO generation, and raw material tracking to help you maintain optimal safety stock levels at all times.
Start your free 14-day trial and see how Prediko helps you manage safety stock for both finished goods and raw materials.
FAQs
What is the 50% rule of safety stock?
The 50% rule suggests keeping safety stock at 50% of your average order quantity to buffer against demand fluctuations and supply chain delays.
What is a good safety stock?
A good safety stock level depends on demand variability, lead times, and business needs, but it should be enough to prevent stockouts without overstocking.
What are the disadvantages of safety stock?
While safety stock can tie up capital, increase storage costs, and risk obsolescence, its advantages, like preventing stockouts and lost sales, far outweigh the drawbacks.
